Buying or selling a home often comes with its own set of jargon, and terms like “under contract” can leave many feeling uncertain. If you’ve browsed Zillow or similar real estate platforms, you’ve likely come across this phrase attached to properties. But what does it actually mean, and how does it impact buyers and sellers?
In real estate, “under contract” signals an important stage in the buying process. It indicates that a seller has accepted an offer, but the deal isn’t final just yet. Understanding this term is key to navigating the market effectively, especially if you’re eyeing a property or trying to close a sale.
Understanding “Under Contract” On Zillow
“Under contract” on Zillow refers to a property where the seller has accepted an offer from a buyer, but the sale is not yet finalized. This status means the home is currently in the process of closing. Factors like inspections, appraisals, and financing may still affect the outcome.
Buyers can still monitor these properties, as some deals may fall through if contingencies aren’t met. However, sellers typically focus on completing the ongoing transaction rather than considering new offers. This status helps users identify homes that are not actively listed but still require attention.
On Zillow, the “under contract” label provides transparency in real estate listings, showcasing properties no longer open for direct offers but possibly subject to availability changes. This stage is critical for tracking property status effectively.
The Process Of Going Under Contract
The process of going under contract involves specific steps that occur after a seller accepts a buyer’s offer. This stage is critical for finalizing the sale, as various contingencies must be resolved.
What It Means For Buyers
Buyers gain exclusive rights to purchase the property while it’s under contract. However, this doesn’t guarantee ownership, as factors like inspections, appraisals, and loan approval could impact the outcome. Buyers often proceed with earnest money deposits, schedule a home inspection, and finalize financing during this period. If any issues arise within the contingency timeline, they can withdraw without losing deposits.
What It Means For Sellers
Sellers must stop accepting new offers and focus on completing the contract obligations. This includes addressing inspection findings and cooperating with appraisers and buyer demands, if reasonable. Although the deal is pending, challenges can arise if contingencies aren’t met, possibly forcing the seller to relist the property.
Common Misunderstandings About “Under Contract”
“Under contract” can create confusion for buyers and sellers unfamiliar with its meaning in real estate transactions. It’s important to clarify common misconceptions to avoid misinterpretation.
Can You Still Make An Offer?
Buyers may think a property “under contract” is off-limits, but that’s not always true. If a deal falls through, sellers may consider backup offers. Submitting a backup offer can increase a buyer’s chances if the current contract ends due to unmet contingencies like financing or inspection issues. However, the seller isn’t legally required to accept new offers while the home is under contract.
Is The Sale Finalized?
“Under contract” doesn’t mean the sale is complete. Factors such as inspections, loan approvals, and appraisals must be resolved before closing. A deal may still fall apart if either party doesn’t fulfill their contract obligations. Until all conditions are met and documents signed, the property ownership doesn’t transfer. Buyers should monitor contingencies, and sellers should focus on meeting requirements to ensure a smooth process.
The Role Of Contingencies In The Contract
Contingencies are specific conditions in the contract that must be fulfilled for the sale to proceed. Buyers and sellers depend on these terms to protect their interests during the transaction process.
Buyer Contingencies
Buyers often include contingencies to ensure the property meets their expectations. Common examples are home inspections, appraisals, and financing approval. The home inspection contingency allows buyers to assess the property for potential issues, like structural damage or faulty systems. The appraisal contingency ensures the property’s value aligns with the sale price, protecting buyers from overpaying. Additionally, financing contingencies provide buyers time to secure a mortgage before moving forward. If any contingency remains unmet, buyers can cancel the contract without losing their earnest money deposit.
Seller Contingencies
Sellers may set contingencies to ensure they meet their own requirements for the transaction. A common example is the “home sale contingency,” which allows sellers to finalize the sale of one house before purchasing another. Sellers might also request specific timelines for closing or conditions for repairs based on the buyer’s inspection findings. If buyers fail to adhere to these contingencies, sellers may terminate the agreement and consider other offers.
What Happens If A Deal Falls Through?
When a real estate deal falls through, the property typically returns to the market, making it available again for potential buyers. This can happen if contingencies in the contract are not met, such as issues with financing, inspections, or appraisals.
Buyers’ Perspective
Buyers usually retain their earnest money deposit if the deal fails due to unmet contingencies outlined in the contract. For example, if a home inspection uncovers major defects or the appraisal comes in lower than the agreed price, the buyer may choose to terminate the contract without penalty. However, if the buyer backs out for reasons outside these contingencies, they risk forfeiting their earnest money.
Sellers’ Perspective
Sellers lose time and may face financial setbacks when a deal doesn’t close as expected. If the deal collapses, they need to relist the property, often leading to delays in finalizing other plans like buying another home. A property that reappears on the market may also attract less attention, as some buyers perceive these homes as problematic, even if the failure had nothing to do with the property itself.
Both buyers and sellers experience challenges when a deal falls through, but contracts include terms to address these situations and protect both parties within agreed-upon conditions.
Conclusion
Understanding what “under contract” means on Zillow is essential for navigating the complexities of real estate transactions. This status highlights a critical phase where both buyers and sellers must fulfill their obligations to move toward closing. While the process can be unpredictable, staying informed about contingencies and potential outcomes ensures smoother decision-making. For those actively monitoring the market, the “under contract” label serves as a valuable tool for tracking property status and identifying opportunities.
Frequently Asked Questions
What does “under contract” mean in real estate?
“Under contract” refers to a stage in real estate where a seller has accepted a buyer’s offer, but the transaction isn’t finalized yet. The sale depends on meeting specific conditions, including inspections, appraisals, and loan approvals.
Can a buyer back out of an “under contract” agreement?
Yes, a buyer can back out if certain contingencies, like home inspections or financing, are not satisfied. If no contingencies apply, backing out may result in losing their earnest money deposit.
What happens if a deal falls through while a home is “under contract”?
If a deal collapses, the property typically re-enters the market. Buyers may reclaim their earnest money if the failure is due to unmet contingencies, but sellers may face delays and decreased interest in the home.
Can backup offers be made on a property that’s “under contract”?
Yes, buyers can submit backup offers on properties “under contract.” If the current deal falls through, sellers may consider backup offers.
Is “under contract” the same as “sold”?
No, “under contract” means the sale is pending and relies on fulfilling contingencies. A property is “sold” only after closing when all conditions have been met and ownership transfers.
What are contingencies in a real estate contract?
Contingencies are conditions that must be met for the sale to proceed. Common examples include home inspections, appraisals, and financing approvals, which protect both buyers and sellers.
What is the role of earnest money in an “under contract” agreement?
Earnest money is a deposit the buyer gives to show their commitment. It’s usually refundable if contingencies aren’t met, but may be forfeited if the buyer backs out for other reasons.
Do sellers consider offers after accepting one and going “under contract”?
Typically, sellers focus on finalizing the current agreement. However, they may consider backup offers if the initial deal falls through.
How does Zillow indicate a home is “under contract”?
On Zillow, “under contract” means the property is in the closing process. It’s no longer actively listed but could return to the market if contingencies are unmet.
What should buyers and sellers do during the “under contract” phase?
Buyers should finalize inspections, appraisals, and financing, while sellers must meet their contract obligations. Both should also ensure contingencies are resolved to avoid delays in closing.
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