Searching for a home can be frustrating, especially during periods of low inventory when it feels like every house you look at goes from “listed” to “under contract” in less than 24 hours. However, for those on the other side of the process, who have finally found their dream home and put in an offer, the words “under contract” can spell sweet relief.
Here’s what you need to know about what it means when a home is “under contract,” and what comes next.
What does “under contract” mean?
When a buyer makes an offer and the deal is accepted, the property is officially under contract, and escrow is opened. In addition to meaning that your bid has been accepted (congrats!) it also means that the clock has started on your “due diligence” timeframe.
“[You] have 17 days to conduct [your] inspections,” Dailey says. “These can include home, roof, pool… and other very important inspections.” Your seller may have provided disclosures about the home’s history and the neighborhood when they listed the property, but this will be your only opportunity to verify these things for yourself before you take possession of your new home. “These steps are critical to a successful sales process,” she says.
What comes after going “under contract”?
There’s still a lot to be done between going under contract and getting the keys to your new home. In addition to the inspections, you’ll need to complete the process to secure your mortgage. If you’re already pre-approved (which most real estate agents require before they’ll even begin showing you houses), the process entails providing supporting documentation to make sure you can afford your monthly payments. This can take some time, so it’s important that you remain in contact with your lenders and get them anything they need as quickly as possible. Otherwise, you run the risk of your under-contract home going back onto the market where others are free to bid on it again.
Going “under contract” doesn’t always mean you’ll close on your new home.
If you’ve ever wondered why homes that are under contract still show up during your home search, it’s because those deals can still fall through. “The reason is that many times issues come up during escrow, and the parties do not agree on some of the issues. “Deals can go sideways for a number of reasons.”
For example, financing can fall through, inspections may uncover extensive repairs that neither the seller nor the borrower want to foot the bill for, or a party to the transaction can fail to uphold the terms of the contract. “Even personality conflicts can cause a deal to fall apart,” she explains. “Escrow is very stressful to both parties, and that is why it is critical to have a good agent who knows the law and knows how to protect you.”
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.