Going Under Contract FAQ
You made an offer, and it has been accepted—go ahead, cue the confetti! And while it’ll be a few more days until you can move in, you’re well on your way to closing the deal on your new home sweet home.
We’re Under Contract… Now What?
As your realtor, I will carefully review important dates and information you will need to know to ensure a succesful closing. We will email you a contract date timeline so you always know the important deadlines.
You’ll need to meet with a mortgage lender to firm up financing details and lock in your interest rate.
Once the home inspection report comes in (and you should definitely request a home inspection if there are not multiple offers on a house), we may need to negotiate any repairs with your seller.
Towards the closing date, you’ll get a call from your closing company’s office to schedule your closing.
more under contract FAQs
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Under contract means that all parties have agreed on terms, have signed the contract, and the signed contract has been delivered to both buyer and seller. Payment of the earnest money deposit is expected but is not a requirement to make a binding contract.
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Due Diligence and Closing.
Due Diligence:
✓ Conduct inspections
✓ Resolve/negotiate any issues from inspection
✓ Your lender will order the appraisal
✓ Obtain homeowners insurance
Closing Time!
✓ Title company will conduct title search and order survey
✓ Receive closing statement/clear to close
✓ Wire funds to closing company or provide certified check
✓ Conduct a final walk-through of property and close
✓ Closing day: Get your keys, it's all yours!
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The earnest money, hand money, or good faith deposit is money that is offered with an offer, or as soon as an offer is accepted, to show the seller that you are serious about moving forward with the purchase of the home. Because you forfeit this deposit if you back out of the purchase for any reason not allowed for in the contract, the larger the earnest money, the more seriously your offer is taken.
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We always recommend that you have a home inspection done. In the scheme of things, paying a few hundred dollars to have peace of mind that there are no hidden dangers or problems is well worth the money.
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The cost of the home inspection depends on the size of the house and additional inspections requested, such as swimming pool, septic tank, termites, insurance four-point (HVAC, plumbing, roof, and electrical,) pest, and radon. An average home inspection, without additional inspections, is about $500.
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If you have gone through the pre-approval process and have been forthcoming with all the information requested by your lender, it’s unlikely you will be turned down, but it does happen. Make sure you do not change jobs, purchase big-ticket items on credit, take out a car or boat loan, or open any other new credit accounts while your mortgage is being processed. If your loan does fall through, talk with your lender about changing to a different loan type.
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When you have the keys! When you are financing your purchase, it takes four to six weeks for your loan to be processed. Once the lender gives the all-clear, closing is scheduled. You will sign your loan documents and both parties will sign documents transferring ownership to you. Unless other arrangements have been agreed upon by both parties, the sellers should have completely vacated the home when they sign the closing papers. You can have your belongings ready to move, and a moving company scheduled before you go to closing.
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Write an offer to purchase on your favorite property
Negotiate the terms of the offer and accept the contract
Deposit earnest money, complete loan application and homeowners insurance quotes
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Here are some common types of contingencies in residential home sales:
Financing contingency: A financing or mortgage contingency safeguards buyers who need to finalize a home loan. If the buyer fails to secure financing, they can withdraw without losing their deposit.
Appraisal contingency: Lenders typically require an appraisal to confirm the home’s value before approving a mortgage loan. An appraisal contingency allows the buyer to either renegotiate their offer or freely walk away from the agreement if the appraisal comes in under the contracted offer price.
Inspection contingency: This contingency clause allows the buyer to have a professional inspection of the property and then decide whether to move forward with the purchase. Significant issues discovered can lead to renegotiations, repairs, or even contract termination without consequences for the buyer.
Home sale contingency: A home sale contingency says that if the buyer doesn’t sell their current home before a specific date, then the contract can be terminated without penalty. Making an offer contingent on the sale of an existing home is often necessary for buyers who need to use equity to afford the down payment or closing costs on a new house. Sellers are often wary of this clause.
courtesy of homelight.com
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Should I make an offer that includes a home sale contingency?
Making an offer with a home sale contingency is advisable if you cannot proceed with the purchase without selling your current home, but be aware it may weaken your offer’s attractiveness to the seller. One way to bypass this concern is with a Buy Before Your Sell program from a real estate solutions company like HomeLight. (More on this below.)Can a seller negotiate my contingent offer?
Yes, a seller can negotiate your contingent offer, including the terms of the contingency and other aspects of the sale agreement.How can I make my contingent offer stronger?
Strengthen your contingent offer by offering a higher purchase price, flexible closing dates, or a larger earnest money deposit.If my contingent offer is accepted, what happens to the listing?
If your contingent offer is accepted, the listing status typically changes to “under contract” or “active under contract,” indicating that the home has an offer but with specific contingencies to be met.
courtesy of homelight.com
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Searching for a home to buy can be a time of excitement and anxiety. You may be building an online watchlist of homes you’re interested in seeing, but then you notice a label tagging your favorite property listing as “under contract” or “sale pending.” You wonder, what’s the difference between under contract versus pending?
Can you make an offer on a home that’s under contract? What buyer contingencies might put a listing back on the market? What home contingency missteps should you avoid when making an offer?
In this post, we’ll explain terms like “under contract,” “sale pending,” and “active under contract” and how they might impact your home-buying journey.
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What does ‘under contract’ mean when buying a home?
When you find a home listing marked as “under contract,” it indicates that the seller has accepted an offer from a buyer, but the sale is not yet final. While under contract, there are typically contingencies in the buyer’s offer that need to be resolved before the sale moves forward. If contingencies are not met, the deal might fall through.
Contingencies while ‘under contract’
Here are some common types of contingencies in residential home sales:
Financing contingency: A financing or mortgage contingency safeguards buyers who need to finalize a home loan. If the buyer fails to secure financing, they can withdraw without losing their deposit.
Appraisal contingency: Lenders typically require an appraisal to confirm the home’s value before approving a mortgage loan. An appraisal contingency allows the buyer to either renegotiate their offer or freely walk away from the agreement if the appraisal comes in under the contracted offer price.
Inspection contingency: This contingency clause allows the buyer to have a professional inspection of the property and then decide whether to move forward with the purchase. Significant issues discovered can lead to renegotiations, repairs, or even contract termination without consequences for the buyer.
Home sale contingency: A home sale contingency says that if the buyer doesn’t sell their current home before a specific date, then the contract can be terminated without penalty. Making an offer contingent on the sale of an existing home is often necessary for buyers who need to use equity to afford the down payment or closing costs on a new house. Sellers are often wary of this clause.
Can I make an offer on an ‘under contract’ home?
While a home is under contract, it’s still possible, though less likely, for other offers to be considered. If contingencies fall through and the initial deal collapses, the property may become available again. However, it’s important to have realistic expectations and continue exploring other options in your home search.
What is Earnest Money and How Much Do I Need?Learn more
How to Protect Your Earnest Money When Buying a HouseLearn more
What does ‘sale pending’ mean when buying a home?
When a home is marked as “sale pending,” it indicates that all the contingencies of an offer have been successfully met, and the sale is moving closer to finalization. Unlike properties under contract, a pending sale is further along in the transaction process. Here’s what this status typically implies:
Fewer obstacles: All major hurdles, like inspections, appraisals, and financing, have been cleared.
Closing phase: The parties are now in the final stages of the transaction, preparing for the actual transfer of ownership.
Can I make an offer on a ‘sale pending’ home?
While it’s technically possible to make an offer on a home with a pending sale, the likelihood of it being considered is quite low. At this stage, the seller and buyer have resolved most, if not all, of the contingencies, and are just steps away from closing. Here are a few points to keep in mind:
Backup offers: Some sellers may still accept backup offers in case the current deal falls through at the last minute.
Low probability: However, since the sale is nearing completion, the chances of the original agreement collapsing are minimal.
Focus on other listings: It’s often more productive to direct your attention and resources toward other properties that are actively seeking offers.
What does ‘active under contract’ mean when buying a home?
“Active under contract” is a somewhat unique status in real estate transactions because it indicates the seller has accepted a purchase offer, but they are still open to backup offers. Here’s more about what this listing tag generally means:
Continued marketing: While an offer has been accepted, and the property is under contract, the seller continues to show the home and is welcoming backup offers. This is often because the seller is not 100% confident in the offer from their current buyer, which may include contingencies that make the seller uneasy.
A middle ground: This status is somewhere between “under contract” and “sale pending.” The seller is cautiously optimistic about the current offer but remains open to alternatives. They may want additional options because of their own moving or home-buying plans.
Can I make an offer on an ‘active under contract’ home?
Yes, you can still make an offer on a home that’s “active under contract.” Here are some points to consider:
Backup position: Your offer would likely be considered as a backup, stepping in if the current deal falls through.
Evaluate the situation: Understand the existing contingencies and assess the likelihood of the current purchase offer not closing.
Stay informed: Have your agent keep in touch with the listing agent so you can stay updated on the status of the current contract.
How often do offers fall through, and why?
Not every purchase offer leads to a successful home sale. While most home sale contracts typically close within a range of 30 to 47 days, they can face delays or even termination. According to data from the National Association of Realtors (NAR) most recent Realtors® Confidence Index Survey:
Terminated contracts: About 6% of contracts are terminated.
Delayed settlements: Around 16% of contracts experience delays in settlements.
Appraisal-related delays: 7% of contracts have delayed settlements specifically due to appraisal issues.
In an earlier Realtors® Confidence Index Survey where contract cancellations were examined in more detail, the NAR found that the most common reasons home purchase contracts are terminated include:
Home inspection issues: These account for 25% of terminations. Problems uncovered during inspections can be significant enough to halt a sale.
Financing issues: 21% of terminations are due to financing problems, such as loan denials or changes in the buyer’s financial situation.
Appraisal issues: Making up 15% of terminations, appraisal issues arise when a home’s appraised value doesn’t match the agreed selling price.
Contingency issues: These contribute to 5% of contract terminations. Contingencies like those for selling a current home can sometimes not be met.
Title or deed issues: Accounting for 3% of terminations, these problems can arise from legal issues related to property ownership.
Employment changes: Loss of employment affects 2% of terminations, impacting the buyer’s ability to secure financing.
Other issues: Making up 29%, this category includes a variety of less common reasons.
courtesy of homelight.com