What does under contract mean?

Question

Hey everyone,

I'm new to the field, and had a quick question.  I hear people say that they have something "under contract."  What does that mean?  Does that mean that they've made a commitment to buy the property for a certain price and the seller has agreed to it as well?  What exactly is in the "contract?"

Thanks in advance!

Sam Leon · Answer

Jared, there are state specific contracts, actually many variations of each, for example you may have a standard contract for single family homes, one for duplexes one for multiple units, commercial properties, mobile home, as-is, etc etc etc...then you have various addendums to address specific situations, such as pre 1978 lead paint disclosures, short sale, backup contract, etc etc etc.

usually the actual contract you will need is dictated by the nature of the home, the seller, and whatever contingency you may impose.  You can write anything you want as contingency goes, naturally the more "kick out" excuses you built in, the less likely your offer to purchase will be accepted.

and then there are REOs, bank owned properties, those you will have your own contract, then the bank has a phone book size contract that overrules everything in your contract.

Sounds complicated but really not once you go through it a few times.

Bill Gulley · Answer

Jared, under contract means a contract to sell was accepted by the seller. That doesn't mean you can't submit an offer, but it means something has to go wrong for it not to close and then be in line for your offer to be considered, chances are, when Realtors are involved the contract will close, but sometimes they don't, so it ain't over until the soprano sings (notice how politically correct I was this time concerning over weight ladies).

If you are wholesaling, under contract means move along, nothing here to see.....  :)

Elizabeth Colegrove · Answer

It means the seller as agreed to sell you the property and you have agree to buy it. Like anything in real estate. IT is not a done deal until closed because there are a lot of ways out for the buyer through inspections,etc

Karen Margrave · Answer

The contract is a Purchase Contract, or any other agreement that both parties have entered into, such as a Lease with an Option to Purchase, etc. Welcome to BP!  Have you seen this yet?  Beginner's Guide

Jared Knudson · Answer

Bill Gulley

Thanks for your response!  You nailed your political correctness. :P

Jared Knudson · Answer

Elizabeth  Colegrove  Oh, so it's going to be subject to the due diligence?  Would it usually be subject to other things, like finding a buyer in a certain time (in the case of a wholesale)?  Or is that just something you could write into it if both parties were amenable to it?

Thanks for the response!

Jared Knudson · Answer

@Sam Leon Thank you so much for your post, it answered my internal questions perfectly.  Thank you!

Jared Knudson · Answer

Ok, that makes sense and helps a lot.  Is there a standard template for these contracts that are specific to each state?  Or can they vary from one investor to another?

Elizabeth Colegrove · Answer

I am not a wholesaler so I can't speak on that. I can say that as a seller I would be okay with a contingent of as long as you found a buyer. The whole point of us entering this agreement was to sell the house. So I would definitely search for previous info about how that's works.

What does under contract mean?

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