What Does It Mean When a House Is Under Contract?

Under contract means that a home seller has accepted an offer on the property but the sale is not final until all contingencies are met.
Written by Nicole Salvia
Reviewed by Melanie Reiff
Under contract means that the seller of the home has accepted an offer. But that sale is not final unless all contingencies are met. The seller is still likely to accept backup offers in case the potential sale falls through.
You found your dream home, but it’s under contract. Does that mean you have to go back to the drawing board? Not necessarily. It’s possible to buy a home that’s under contract—although your chances of being successful are lower and the process is more complex… It’s your dream home, remember. 
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What does under contract mean?

Under contract means that the owner of a home and a potential buyer have had their first “meeting of the minds” agreement. Basically, the seller has informally accepted an offer, as long as all the contingencies are met
Most sellers and/ or realtors will continue to show a home under contract in case the current contract falls through. Some will also continue accepting backup offers. 

What does active under contract mean?

Active under contract means that a seller and buyer have agreed upon a purchase price for the home. In this scenario, the seller cannot accept your backup offer unless there is a breach of contract by the buyer. 

What’s the difference between under contract and pending?

A home under contract means an agreement has been made and all is well as long as certain contingencies are met. Pending indicates that all or most contingencies have been met—aka, a pending property is much closer to being sold than one that is just under contract. 
You may still be able to make a backup offer on a pending sale, however, you most likely will not be able to view that home. Typically, a pending sale will fall through due to the buyer not being able to secure the right financing or a last-minute home inspection surprise. 
MORE: Negotiating after a home inspection

What are contingencies?

In real estate, contingencies are conditions that must be met in order for the sale of a home to be finalized. There are different types of contingencies. Both the buyer and seller may come to the table with contingencies. The most common are:
  • Financing
  • Home sale
  • Inspection
  • Home appraisal

Can I buy a home that’s under contract?

Yes, you can buy a home that is under contract. If you really love a house that is under contract, put in a backup offer. You miss 100% of the shots you never take, right? 
Worst case scenario, you’ve wasted a little time preparing an offer. Best case scenario, the current buyer backs out and your offer is looking good waiting in the wings.
There’s also a decent chance that certain contingencies will not be met. If the buyer cannot secure financing, if the home fails an inspection, if the appraisal falls short of the asking price, are all reasons homes fall out of being under contract.

How to buy a home under contract

If you’re going to go after a home under contract, here are a few steps that may help you get a bit closer to securing that deal.

Step 1. Find out if they’re accepting backup offers

Have your real estate agent find out if the seller is accepting backup offers. They should be able to determine the contents of the current contract and seriousness of the seller. If they are open to backup offers, work with your real estate agent on writing an offer that is attractive to what the seller wants.

Step 2. View the home

Stop! Though you may be anxious to make an offer, you should always view the home first. Photos never tell the whole story. If the seller is interested in your backup offer, they will agree to let you view the home. 

Step 3. Make a competitive offer

Once you and your realtor have determined the seller is interested in your offer, you can make an appealing offer on the home. If you offer what the seller is asking in price and also lack any contingencies, you may have a pretty good fighting chance. 

Step 4. Write an offer letter 

A little tug on the old heartstrings never hurt anyone. Include a personal letter telling the seller why you love their home, their neighborhood, or their school district. Making a personal connection could sway the owner towards your offer.  

Is home insurance required before going under contract?

While there are no laws that require a homeowner to purchase home insurance, almost all lenders will require
home insurance before financing your loan
. You’ll also have to keep that policy until the loan is paid in full. 
Lenders will typically request proof of your homeowners insurance policy anywhere from a few days to a few weeks before your closing date. 
You’ll need enough insurance to cover your home's replacement value. This is different from the current market value or purchase price. Your insurance company can calculate this for you but it's usually based on what it costs to rebuild your home from the ground up.
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Under contract means an offer has been accepted assuming all buyer and seller contingencies will be met. Pending means that all contingencies have been satisfied or agreed upon and the sale is on the cusp of being completed leaving little room for other interested buyers.
No, under contract does not mean sold. It simply means the home is well on its way to being sold but there are many steps left required to complete the sale. Don’t let an under contract listing deter you from trying to buy your dream home.
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