You’ve spent months scouring Zillow, touring dozens of open houses, and finally, you’ve found “the one.” You submit an offer, the seller signs it, and suddenly the status on the listing changes to Under Contract. For many buyers, this is the moment they start picking out furniture, but seasoned real estate veterans know that this is where the real work begins. Being under contract is not a finished deal; it is a legally binding waiting period where both parties must prove they can cross the finish line.
In real estate, “under contract” means that a buyer has made a formal offer on a property and the seller has accepted it in writing. However, the ownership of the parcel hasn’t changed yet. Instead, the property enters a period of due diligence, where various “safety nets” (contingencies) are tested. If these conditions aren’t met, the deal can—and often does—collapse before it reaches the final settlement statement.
The Difference Between Under Contract and Pending
While often used interchangeably, there is a subtle but important difference between these two statuses in the Multiple Listing Service (MLS). Under Contract usually means the deal still has active contingencies. For example, the buyer might still need to get a home inspection or finalize their loan.
Pending typically means all contingencies have been cleared. The appraisal came in at value, the inspection was clean, and the buyer’s financing is fully approved. At the pending stage, the sale is almost a certainty, whereas “under contract” still carries a statistically significant risk of falling through—roughly 5-7% of contracts fail during this stage.
The Crucial Role of Contingencies
Contingencies are the clauses in your PSA (Purchase and Sale Agreement) that allow you to back out of the deal without losing your EMD (Earnest Money Deposit). These are the most common milestones during the under-contract phase:
- Inspection Contingency: This allows the buyer to hire a professional to check for structural issues, mold, or a latent defect that wasn’t visible during the initial tour.
- Appraisal Contingency: The lender will hire an appraiser to ensure the house is worth what you’re paying. If the appraisal comes in low, the buyer may have to cover the gap or renegotiate the price.
- Financing Contingency: Even if you are pre-approved, the lender must give “final clear to close” after reviewing your latest financial T12 records and credit history.
- Title Contingency: A title company will search for liens, easements, or escheat claims to ensure the seller has the legal right to sell the property.
What Happens to the Earnest Money?
When a house goes under contract, the buyer typically puts down an EMD. This money is held in an escrow account by a neutral third party. If the buyer backs out for a reason covered by their contingencies (like a failed inspection), they get this money back. However, if the buyer simply gets “cold feet” and walks away after the contingency deadlines have passed, the seller usually gets to keep the deposit as compensation for the time the parcel was off the market.
How Long Does the “Under Contract” Period Last?
On average, a property stays under contract for 30 to 45 days. This timeline is dictated by the lender’s ability to process the loan and the speed of the inspectors and appraisers. Cash deals can move much faster—sometimes closing in as little as 7 to 10 days—because they skip the appraisal and financing hurdles. During this time, the buyer should avoid making any large purchases (like a new car) that could affect their debt-to-income ratio and jeopardize their TRID disclosures.
Can a Seller Accept Other Offers?
Yes, but with a catch. While a property is under contract, the seller cannot dump the current buyer just because a better offer came along. However, they can accept backup offers. If the first deal falls through because of a financing issue or a disagreement over repairs, the seller can immediately move to the backup buyer without having to relist the property and wait for new comps to be generated.
Conclusion: The Path to Ownership
Being Under Contract is an exciting, nerve-wracking phase of the home-buying journey. It requires a high level of organization and a commitment to meeting strict deadlines. By understanding the contingencies and protecting your EMD, you can navigate this “in-between” period with confidence.
Are you currently under contract and worried about the appraisal? Check out our guide on real estate comps to see how your value is determined. If you’re a commercial investor, you might be more interested in how net absorption affects your market’s stability. And before you sign those final papers, make sure you understand every fee listed on your settlement statement.
