From Active to Under Contract

By
August 30, 2024

Understanding what it means when a property is under contract.

Navigating the Path to "Under Contract" in Real Estate

The journey from listing a property to getting it under contract is a significant milestone in any real estate transaction. For buyers and sellers alike, understanding what it means when a property is "under contract" is crucial to navigating the complexities of the real estate market.

What Does "Under Contract" Mean?

When a property is "under contract," it signifies that the seller has accepted an offer from a buyer, and both parties have agreed to move forward with the sale. This status change is critical because it marks the transition from negotiations to the legal and financial steps required to close the deal.

Key Steps Leading to "Under Contract"

  1. Listing the Property: The journey begins with listing the property. This includes marketing efforts, setting a competitive price, and preparing the home for showings. A well-presented property attracts potential buyers and increases the likelihood of receiving offers.
  2. Receiving Offers: Once listed, buyers will submit offers, often through their real estate agents. Each offer outlines the proposed purchase price, contingencies, and other terms. The seller can accept, reject, or counter the offer.
  3. Negotiating Terms: Negotiation is a crucial step where the buyer and seller discuss and agree on terms such as the sale price, closing date, and any contingencies. Common contingencies might include financing, inspections, or the sale of the buyer’s current home.
  4. Accepting an Offer: When the seller accepts an offer, the property moves to "under contract" status. This means both parties are now committed to fulfilling the agreed-upon terms, pending the resolution of any contingencies.

What Happens After a Property is "Under Contract"?

Once a property is under contract, several important steps occur:

  1. Home Inspection: The buyer typically schedules a home inspection to identify any potential issues with the property. Depending on the results, further negotiations may occur, such as requests for repairs or adjustments to the sale price.
  2. Appraisal: If the buyer is financing the purchase, the lender will require an appraisal to ensure the property’s value aligns with the loan amount. If the appraisal is lower than the offer price, additional negotiations may be needed.
  3. Finalizing Financing: The buyer works with their lender to secure financing, ensuring that all loan conditions are met. This step is crucial, as failure to secure financing can result in the contract falling through.
  4. Title Search and Insurance: A title company or attorney will conduct a title search to ensure there are no legal claims or liens against the property. Title insurance is then purchased to protect the buyer and lender from any future disputes.
  5. Contingency Removal: As each contingency is met, it is formally removed from the contract. Once all contingencies are satisfied, the sale moves closer to closing.

The Closing Process

The final step in the process is closing. This is when the buyer and seller meet to sign the necessary paperwork, transfer ownership, and finalize the sale. The buyer receives the keys, and the seller receives payment for the property.

Final Thoughts

Reaching the "under contract" stage is a major achievement in the real estate process, but it's just the beginning of the final steps leading to a successful sale. For both buyers and sellers, understanding each phase of this journey helps ensure a smooth and stress-free transaction. As the process unfolds, staying informed and working closely with real estate professionals will guide you to a successful closing and a new chapter in homeownership.

Looking to purchase real estate? Thinking of selling your property? Contact Bold North Realty & Auctions at (218) 766-9607.