What Does Under Contract Mean in Real Estate: Helpful Hints

Posted by Amber Harvey on March 30, 2023

any things play into your purchase when you’re looking to buy a home. One of the most important things, and the one that can determine the success of your deal, is the real estate agent.

There’s no denying the fact that real estate agents play a vital role in real estate deals. While they take care of all the paperwork and legalities, they also handle all customer-facing tasks like listing and selling properties. They’re also responsible for finding buyers and negotiating on behalf of the seller. With so much responsibility, real estate agents deserve much credit for their work behind the scenes. But what does it mean when a home is "under contract" or "pending sale"? And how long does a home typically stay under contract before being sold? Read this article to find out all about it!


The Basics of a Real Estate Transaction

A real estate transaction is a three-part process: 

The first part involves the buyer and seller. These are the parties involved in the real estate transaction. When buying or selling real estate, the buyer is usually called the purchaser, and the seller is called the seller.

The second part of real estate transactions involves financing. Banks or other places that lend money are essential because they provide the money for home loans or home financing for real estate transactions.

Real estate transactions involve inspection and appraisal. Prospective home buyers must inspect the house before closing the deal with the seller. This inspection helps buyers understand the house's condition and make an informed decision. After the assessment is done, professionals do an appraisal to figure out how much money should be paid and how much the home or property is worth.

What does "under contract" mean in real estate?

When a home is "under contract," the home seller has accepted an offer from a buyer to sell their home. This is an early step in the process of buying a home. The sale terms may include the offer amount, the closing costs, the earnest money deposit, and any other things that could stop the sale. A new buyer can make a backup offer if the current one falls through. An under-contract property is in the sale process, but it still needs to be a done deal. It's important to keep negotiating and going over the contract until all possible problems have been solved.

What does "active under contract" mean in real estate?

When a home is listed as "active under contract," the seller has accepted an offer from a buyer to sell the home. The buyer and seller must agree to the terms of the sale, such as the offer amount and any contingencies that might prevent the deal from going through.

An "active under contract" home is early in the home-buying process, and the deal may not be finalized. Backup offers can be made on an "active under contract" property, and if the current buyer falls through, that offer will be considered first in line for consideration. Before making a final decision, buyers must consider all possible requests carefully.

What does the "pending sale" mean?

The term "pending sale" in real estate means that a buyer has signed a contract to buy the property and that all possible problems have been solved. The sale is close to completion, and the property can be removed from the market and no longer shown to prospective buyers. 

Once a real estate property is marked as "pending sale," it is usually taken off the market and can no longer be shown to potential buyers. So, it's important to remember that pending sales mean something other than that a property has been sold or that all possible problems have been solved. When talking about real estate deals, the term "pending sale" is usually used to discuss properties that are close to being finished.

Under contract vs. sale pending: What’s the difference?

Under contract and sale pending are two terms you may come across in real estate. These terms describe the status of a real estate deal between a buyer and seller. Under contract means there are contingencies left to clear, whereas a pending sale means all contingencies have been met and the value is on its way to closing. Let's take a look at the main differences between a pending sale and a contract sale:

Under Contract:

  • The property under contract has accepted a formal offer by the seller, and both parties are working toward a closing date.
  • The buyer and seller have agreed to the terms and conditions outlined in the contract.
  • The property is considered off the market, as it is no longer available for showings or other offers.
  • However, the sale is finalized once the closing process is completed and the buyer has taken possession of the property.

Sale Pending:

  • A property marked as "sale pending" means an offer has been made, but both parties have not yet signed the contract.
  • The seller may still consider other offers, or negotiation or due diligence may occur before signing a contract.
  • The property is only considered sold once a contract is signed and the sale is under contract.
  • Only then will the property be available for showings and other offers, but it is generally considered unlikely that the seller will accept another offer.

What does "contingent" mean?

When it comes to real estate, a "contingent contract" means that the sale of the property depends on something else, like the buyer having to sell their current home first. When a property is marked as contingent, the buyer has made an offer and the seller has accepted, but the deal is conditional upon one or more things happening. A contingent offer is an agreement between a seller and a buyer to sell a property, but the sale won't go through until one or more conditions are met.

Most contingent contracts are written down, and the terms can differ depending on the type of property being bought and sold. Most contingencies are meant to give clarity and certainty to both parties and keep them from making mistakes that could be very expensive.

Types of contingent

A contingent offer is a deal between a buyer and a seller to buy or sell real estate, but the deal will only go through once certain conditions are met. Typical contingencies include a home appraisal, mortgage, and home sale contingencies. Have a look below:

Mortgage financing contingencies

Mortgage financing contingencies are a standard part of real estate contracts. They allow buyers to purchase a home without risking the loss of any earnest money deposit, provided their loan falls through. Usually, this is written into the contract, and buyers have to give more information about the type of mortgage they are applying for and when they will show proof of approval. 

Sometimes, a financing contingency gives buyers an out if their loan falls through. This is beneficial if your closing date gets pushed back due to financing issues or other delays. Some sellers may prefer cash-only offers because it makes it less likely that the buyer will be able to get financing.

Appraisal contingencies

In real estate contracts with appraisal contingencies, a home appraisal is needed to make sure the property's value is high enough to support the sale price. If the buyer needs to pay the difference between the appraised value and the sale price or if the seller can reduce the price if the appraisal is low, this contingency can help protect both parties in a real estate transaction. 

Before the purchase can be financed, the appraisal requirement must be met because mortgage lenders can only offer loans up to a property's appraised value. Homebuyers may also include mortgage contingencies in their purchase agreements to make sure they can get the money they need to buy a home. Lastly, appraisal clauses may be null and void if the buyer can't get more financing and the appraised value is less than the sale price.

Home sale contingencies

A clause in a real estate contract that lets the sale go forward if the buyer can sell their old home is called a "home sale contingency." While home sale contingencies are common, some home sales contracts don’t include one. In these instances, financing, appraisal, and inspection contingencies must be completed first. 

This allows the buyer to back out of the deal if things don’t go as planned. Contingencies allow buyers to protect themselves from potentially costly financial or personal risks during the home sale process and ensure they get what they paid for when the deal closes. They also make sure that the sale will go through even if one of the parties backs out.

Inspection contingencies

Homebuyers need home inspection contingencies, which usually last between three and fourteen days. These contingencies cover the period between the inspection and closing of a real estate transaction. Typical contingencies include home inspection contingencies and sales contingencies. 

With a home inspection contingency, a professional home inspector looks at the property, and the buyer and seller can talk about making repairs or getting out of the contract. One of the most important parts of buying or selling a home is getting a property inspection. A home inspection contingency is necessary to make sure everything works well before closing. Homebuyers need to have backup plans in place in case of problems with a property before closing.

How often do contracts fall through?

In real estate transactions, contingencies are shared in real estate contracts. These contingencies can vary from one real estate contract to another. Price and terms of sale are two other things that may be in a real estate contract. 

When the appraised value of a home is different from the sale price, or if financing needs to be secured by closing the deal on time, real estate contracts can fall through. Still, a house under contract can fall through due to health and safety issues or other unforeseen circumstances.

How Long Can A House Be Under Contract?

When a home is under contract, it is considered closed. In this case, the house is under contract for a specific period, usually around 6–8 weeks. It is common for a home to be under contract for 4 months or more, as this period has been defined in most real estate contracts.

The sale of a property becomes final once all contingent events are met, such as the financing closing and the inspection being done. The process from offer acceptance to final sale usually takes 4–8 weeks, depending on the real estate agent handling the sale.

Some houses under contract could be short sales or have a "home sale contingency" added. This would mean the buyer has to complete the deal before the seller gets another offer on the house.

How long a pending status can be under contract depends on the buyer's choice and the real estate agent who is handling the deal.

Can a seller accept another offer while under contract?

A seller can accept another offer while the property is under contract, but the sale is only final once all contingencies are met. A backup offer, in other words, is a legally binding agreement that can place an offer next in line to be accepted if a previously accepted deal falls through.

When a home is under contract, it is typically enough to deter further showings. That means buyers are more likely to decide on the home quickly, which helps with closing costs and other expenses. If you’re interested in a home under contract, you can make a backup offer, though the pros and cons should be discussed with a real estate agent. 

An offer is made and accepted in principle before going into contract. Backup offers help buyers secure real estate quickly and effectively. They shouldn't be seen as extra bids or signs that someone wants to buy the house. They are legal agreements that protect buyers when they’re ready to buy a home.

What happens if you cancel the contract?

When a buyer or seller wants to back out of a real estate contract, they must follow the terms and conditions of the agreement. If either party breaks the terms of the contract without a good reason, the other party may have to pay damages, return a buyer's earnest money deposit, or sell the house because the court said so.

A breach of contract lawsuit could also entail the payment of monetary compensation. Most of the time, you have to pay the penalty or some other kind of compensation to get out of a real estate contract. This indicates the importance of careful pre-qualification before finalizing any real estate deal. Remember, you can compare different offers before breaking a real estate contract.


Real estate transactions can be complicated, and there are many parties involved. So it would be best if you were well-informed about the real estate contract process and the factors that can affect it. This includes understanding the common terms (such as contingencies) and the parties' rights and responsibilities. Even though real estate contracts are lengthy, they shouldn’t be problematic if you understand the basics. Remember, there is always a way out of an agreement if you feel pressured or misrepresented by a real estate agent or agent’s agent. When you're ready to move in the real estate market, contact Excelsior Realty for expert guidance and personalized service.