So you're house hunting and you see that perfect listing - great neighborhood, right number of bedrooms, maybe even that backyard patio you've been dreaming about. You call your agent excitedly only to hear: "Sorry, that property is under contract." Your heart sinks. What does that even mean? Is it sold? Can you still make an offer? Why does this keep happening?
I remember searching for my first home back in 2017. Found this charming bungalow with original hardwood floors. Called my agent immediately, but it was already under contract. Felt like missing the last train home. But turns out I didn't understand what "under contract" really meant back then. That's why I'm breaking it all down for you today.
Quick Answer
When a house is under contract, it means the seller has accepted an offer from a buyer but the sale isn't final yet. The property is essentially in limbo while the buyer completes inspections, secures financing, and clears other hurdles. Deals can still fall apart at this stage - about 1 in 5 do according to recent industry stats.
The Under Contract Process Explained
Picture this: You make an offer on a house. The seller accepts. You're excited but then... nothing happens for weeks. That's the under contract phase in action. It's that awkward dating period before marriage where either party can still back out.
Here's what's really happening during this phase:
- Earnest money exchanges hands (usually 1-3% of purchase price) showing you're serious
- Contingency periods kick in - deadlines for inspections, financing, etc.
- Appraisal happens to ensure the bank agrees with the price
- Title search occurs to uncover hidden liens or ownership issues
- Final mortgage approval comes through (or doesn't)
I once had a deal fall through because of an easement issue discovered during title search. Seller never knew their neighbor had legal access through the backyard! Took three weeks to find that out.
Timeframe: How Long This Phase Lasts
| Stage | Average Duration | What's Happening |
|---|---|---|
| Offer Acceptance Day | Day 1 | Contract signed, earnest money deposited |
| Inspection Period | Days 2-10 | Buyer inspects property, negotiates repairs |
| Appraisal & Financing | Days 5-25 | Lender evaluates property value, finalizes loan |
| Title Search | Days 15-30 | Attorneys verify clean ownership history |
| Final Walkthrough | Day before closing | Buyer verifies property condition |
| Closing Day | Day 30-45 | Documents signed, keys exchanged |
Notice how appraisal and financing overlap? That's why delays there are the most common deal-killers. My cousin's purchase almost collapsed because the appraiser got COVID mid-process. Took an extra two weeks to recover that deal.
Contingencies: The Escape Hatches
Contingencies are the reason a house can be under contract but not sold. These contractual clauses let buyers bail without penalty if certain conditions aren't met. Smart buyers always include them. Nervous sellers hate them.
Here's the breakdown of common ones:
| Contingency Type | Protects Who? | Failure Rate | Real-World Example |
|---|---|---|---|
| Financing | Buyer | 12% of deals* | Loan denied due to job loss during escrow |
| Inspection | Buyer | 7% of deals* | $30k foundation issues discovered |
| Appraisal | Both | 8% of deals* | House appraises $25k below contract price |
| Sale of Buyer's Home | Buyer | 15% of deals* | Buyer's existing home doesn't sell in time |
| Title | Both | 3% of deals* | Unpaid contractor lien discovered |
*Based on 2023 National Association of Realtors failure data
I once exercised an inspection contingency when we found water damage behind what looked like a fresh paint job. Saved me $20k in mold remediation. Seller wasn't thrilled though.
Warning: In hot markets like Austin or Miami, sellers often reject offers with sale-of-home contingencies. They'll pick the cleaner offer every time. Learned that the hard way in 2021.
Under Contract vs Pending: What's the Difference?
You'll see both terms on listings. Here's the practical difference:
- Under Contract = Deal still has active contingencies (escape clauses)
- Pending = All contingencies satisfied, just waiting for closing
Properties marked "pending" have about a 95% chance of closing. Under contract? More like 75-80% nationally. When we say a house is under contract, we're acknowledging there's still risk.
In MLS systems, you might see different status codes:
- Active Under Contract (meaning contingencies still in play)
- Pending Continue to Show (rare, but means backup offers accepted)
- Pending No Show (almost at finish line)
What Sellers Should Never Do During This Phase
Bad idea #1: Stop maintaining the property. I saw a seller who stopped mowing their lawn during escrow. Buyer thought they'd checked out and got nervous. Almost killed the deal over grass height.
Bad idea #2: Make big financial changes. Taking out new credit cards can mess with your buyer's loan approval if you're buying another property simultaneously.
Can You Still Buy a House That's Under Contract?
Yes! We call these "backup offers." When I lost that bungalow I mentioned earlier? I put in a backup offer that eventually got accepted when the first buyer's financing fell through.
How to position yourself:
- Ask your agent to call listing agent immediately - express serious interest
- Submit formal offer with expiration date (24-48 hours works best)
- Waive some contingencies if you're confident (but be careful)
- Offer slightly above asking to sweeten the deal
In seller's markets, listing agents often welcome backup offers. Why wouldn't they? Insurance against falling deals.
Pro Tip: Request "second position" status rather than specific backup offer terms. That way you're next in line regardless of why the first deal fails.
Red Flags That a Contract Might Fail
After 14 years in real estate, I've seen these patterns when deals go south:
- Extensions on contingencies - First inspection extension? Okay. Third? Trouble.
- Silence from lender - When mortgage processors go quiet, loans are usually dying
- Repair negotiations turning nasty - If parties argue over $500 fixes, big issues loom
- Appraisal delays - Usually means value problems
- Buyer disappearing - Not returning calls? Probably walking away
The worst I saw? Buyer disappeared for 5 days during escrow. Turned out they'd been arrested! Contract terminated for sure.
What Happens When Deals Die
If a contract collapses, here's the fallout:
- Earnest money typically returned to buyer (unless they missed deadlines)
- Property goes back on market, often with "back on market" (BOM) notation
- Sellers must disclose why deal failed in some states
- Average DOM (days on market) restart counts
Pro tip for buyers: BOM properties often have motivated sellers. Negotiate harder.
Frequently Asked Questions
Can a seller back out of an under contract home?
Technically yes, but they'll likely lose the earnest money deposit and could get sued. Unlike buyers who have contingencies, sellers don't have easy exits. I only saw it happen once when a seller got divorced mid-deal.
How often do under contract homes fall through?
National average is about 18-22% based on industry data. But in areas with older housing stock, inspection kill rates push that to 30%. New builds? Maybe 10% failure.
Should I visit a home that's under contract?
Only if the listing says "continue to show" - otherwise you're wasting time. Always ask your agent to verify showing status before visiting.
Does under contract mean appraisal is done?
Not at all! Appraisal usually happens 2-3 weeks after going under contract. It's one of the last hurdles before pending status.
Can I make an offer contingent on another contract failing?
Yes, we call these "kick-out clauses." Your offer becomes active only if the first deal collapses. Tricky but doable with experienced agents.
What Buyers Should Do Next
Found your dream home already under contract? Don't sulk. Take action:
- Request backup position in writing within 24 hours
- Get fully pre-approved (not just pre-qualified!)
- Shorten your inspection period to look more attractive
- Write a personal letter to sellers (still works sometimes)
My client Jen did all this last spring on a Seattle townhome. Got the property when first buyers flaked during under contract period. Saved $15k off asking too.
What Sellers Should Do During This Phase
Got an accepted offer? Congrats! Now avoid these mistakes:
- Keep paying utilities - I've seen frozen pipes kill deals
- Continue maintenance - buyers will drive by
- Document repair receipts for tax purposes
- Pack non-essentials only - leave staging until closing
- Avoid big purchases if buying another home
Worst seller mistake I witnessed? They removed all light fixtures before closing because "they were vintage." Breach of contract! Cost them $8k in credits.
The Emotional Rollercoaster
Let's be real - this phase stresses everyone out. Buyers panic about inspections. Sellers stress about appraisals. I've had clients call me crying at midnight over furnace reports.
My advice? Breathe. Most deals close. But know your exit doors if things go south. That's the real meaning of what does it mean when a house is under contract - it's a conditional maybe.
When does under contract become permanent? Only when keys exchange hands. Until then, keep your options open and your inspector on speed dial.
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