What Does Under Contract Mean in Real Estate?

Key Takeaways

• “Under contract” in real estate means a seller has accepted a buyer’s offer, but the sale isn’t finalized yet. It’s an important step between making an offer and officially closing the deal.
   
• Being under contract doesn’t mean the property is sold—there can still be inspections, appraisals, or financing issues that could affect the sale.
   
• Buyers still have rights during this period, including the possibility to back out under certain contingencies, while sellers must follow agreed-upon obligations.
   
• There’s a type called active under contract, meaning the property is still technically on the market, often allowing backup offers.
   

Introduction

When you’re scrolling through real estate listings or talking to a real estate agent, you might see a property marked as “under contract” and wonder, “Wait, does that mean it’s sold? Can I still make an offer?” It can feel a little confusing at first because the words don’t always explain the whole story.

In real estate, terms like under contract, pending, and contingent get thrown around a lot, and each one has a slightly different meaning. For buyers, sellers, and even casual home shoppers, knowing what these labels really mean can save time, prevent frustration, and even help you make smarter decisions.

This guide will take a close look at what it means when a property is under contract. We’ll explore the journey from the moment an offer is accepted to what happens before the sale is officially closed. You’ll learn what buyers and sellers can do during this stage, what “active under contract” means, and even whether a buyer can back out—or if someone else can still make an offer.

 

Definition of “Under Contract”

In simple terms, a property is under contract when a seller has accepted a buyer’s offer, and both parties have signed a legally binding agreement. It’s like a handshake—but on paper—saying, “We agree to move forward with this sale under these conditions.”

Being under contract does not mean the property is sold yet. There are still steps or “contingencies” to complete, like inspections, appraisals, and financing approval. Until these are finalized and the deal closes, things can change.

It’s also important to understand the differences between similar terms:

• Pending: Usually means the contract is complete, contingencies are cleared, and the sale is moving toward closing.
   
• Contingent: Means the sale depends on certain conditions being met, like the buyer securing financing or passing a home inspection.
   
• Active Under Contract: Some listings remain on the market even while under contract. This allows sellers to accept backup offers if the current deal falls through.

 

How a Property Becomes Under Contract

Getting a property under contract is a bit like setting a date—you’ve agreed to move forward, but there are still a few steps before anything is official. The process usually starts when a buyer submits an offer on a property. If the seller likes the terms, they accept it, and both parties sign a purchase agreement. At this point, the property is officially under contract.

However, being under contract doesn’t mean everything is set in stone. Most contracts include contingencies, which are conditions that must be met for the sale to move forward. Common contingencies include:

• Financing contingency: The buyer needs loan approval from their bank.
   
• Inspection contingency: The property must pass a home inspection or any agreed-upon repairs must be made.
   
• Appraisal contingency: The property must appraise at or above the agreed price.
   

Once the contingencies are cleared and all conditions are satisfied, the property usually transitions from under contract to pending. This means the deal is much closer to closing, and it’s less likely that the sale will fall through.

It’s also worth noting active under contract listings. Some sellers keep their property technically “active” on the market while under contract, often to allow backup offers in case the current buyer cannot complete the purchase.

What “Under Contract” Means for Buyers

One of the most common questions is: can a buyer back out? The answer is yes—but only under certain circumstances, usually tied to contingencies in the contract. For example, if the home inspection reveals serious issues, or the buyer’s financing falls through, they may legally back out without penalties. Once all contingencies are cleared, though, backing out can become much more complicated and may involve financial consequences.

Another question buyers often ask is: can you make an offer on a property that’s already under contract? The answer is yes but it will be considered as a backup offer and in case the current deal fails then it will be your turn. During this stage, buyers should also:

• Stay in regular communication with their agent.
   
• Ensure financing and inspections are on track.
   
• Review all contract details carefully to avoid surprises.

 

What “Under Contract” Means for Sellers

 

• Honor contingencies: Allow inspections, appraisals, or other agreed-upon steps to take place.
   
• Maintain the property: Keep it in good condition until the sale closes.
   
• Communicate transparently: Respond promptly to buyer requests and updates from their agent.
   

Sellers should also be aware of potential challenges. As mentioned earlier, a buyer can back out during the contingency period, leaving the property back on the market. Which is why the term “active under contract” exists to attract other potential buyers that are very much interested in the property.

 

How Long Does a Property Stay Under Contract?

A property typically stays under contract for 30 to 60 days, depending on contingencies, financing, and how quickly inspections and appraisals are completed. Some deals move faster, while others take longer if complications arise. Active under contract listings might remain visible during this period, allowing backup offers just in case.

 

Bottom Line

Being under contract doesn’t mean you should lose hope if there’s a property you really like. Even during this stage, there’s still a chance the deal could fall through. The key is to stay in touch with the seller or their agent to show continued interest. This way, you’re ready if the current contract fails or if the property allows backup offers.