When you think of buying a house, it can all seem overwhelming and sometimes even confusing. It seems like there is always something to read, something to sign, financial records to find, credits checked and rechecked, and the anxiety of everything involved. And then comes new terms that leave us wringing our hands in frustration. Under Contract, Sale Pending, Conditional Offers, and Contingency are just some of these key real estate terms, and today we’re going to explain them.
What Does Under Contract Mean?
When you see the words “Under Contract,” it means that the sale of the house is currently being negotiated and the seller and buyer have come to some terms such as the sale price of the house, a closing date, personal property, earnest money, and more. However, the sale of the home is not final and anything could happen. The buyer could change their minds, the seller could back out, something could go wrong with the paperwork or loan approval, or an appraisal could come back that requires a price change. “Under Contract” basically means that a sale is pending but that the home hasn’t been sold yet.
Cooling Off Period
There is a real estate term that is often included in the sale contract called “cooling off”. Much like we need a “cooling off” period when something has made us angry, the same concept applies to buying property. This period of “cooling off” gives a certain amount of days, which varies from state to state, to cancel the contract on the property — to change your mind and back out without penalty. This allows any decisions that were made in the moment of excitement to be thought-out better.
So, what does it mean when a house is under contract with conditional offers? A conditional offer means that an agreement has been made with conditions attached. For example, the buyer could say that he’ll buy the house if it’s painted or it passes inspection. Certain conditions must be met for the sale to go through.
How is “Under Contract” Different from “Sale Pending”
The difference between “under contract” and “sale pending” is basically that there are certain conditions that need to be met when it comes to “under contract” and the sale is much closer to being finalized with “sale pending.” All of the conditions “under contract” have been met and now the property is pending, the sale close, with maybe a few loose ends to tie up.
How is “Under Contract” Different From a “Contingent” Status?
The difference between “under contract” and a “contingent” status is that “under contract” has an offer for the property and it is not being marketed or shown to other buyers. It’s not finalized, and others can put in a bid but an agreement has been reached. However, a “contingent” status means that the property has an offer on the property, but it is still being marketed and shown to other buyers while it is under contract. “Contingent” also means that the deal has conditions that must be met before the deal can be finalized. Let’s look at a few of these contingency conditions.
Home Inspection Contingency
When a Home Inspection Contingency is involved in the listing, that is basically a condition that the buyer has the right to have the property inspected within a particular time period before the sale can be finalized. It also gives the buyer the right to cancel the contract or negotiate repairs on the property based on the report of the home inspection. It gives the buyer more security for the sale, as they can identify any major issues before the deal is closed. For instance, a home inspection finds that the roof of the home is in disrepair and should be replaced. The buyer can then ask the seller to replace the roof, reduce the home price based on the roof’s condition, or walk away from purchasing the home completely.
An Appraisal Contingency protects the buyer and assures them that they aren’t buying over the appraised value of the property. If the appraisal isn’t for a specific amount, the buyer has the right to withdraw their contract bid without any repercussions or consequences and in most cases, if the contract is terminated, the earnest money paid by the buyer in the beginning stages of negotiating terms is returned.
A Mortgage Contingency is another way that the buyer is protected. This contingency handles the mortgage aspect, and the sale is contingent on the buyer getting financed for the purchase pierce amount. If the financing falls through, the buyer won’t be faced with legal actions for breaking the contract. The buyer has a specific amount of time to obtain financing from the start of term agreements before the sale can be finalized and if the buyer can’t secure financing, the contract can be terminated without penalty.
Home Sale Contingency
The Home Sale Contingency is yet another way the buyer is protected. With this contingency in place, the sale of the new property is dependent on the buyer’s home or property being sold within a specific amount of time. If the buyer’s property sales, the purchase of the new property and contract moves forward. However, if the buyer’s home does not sell within a specific amount of time, the contract on the new property may be terminated without repercussions and all money returned to the buyer.
Can You Still Make An Offer on an Under Contract Property?
You can still make an offer on a property listed as “Under Contract.” If the sale falls through—regardless of the reason— you would have your bid for the home in place already, a bit like waiting in line.
Buying a home isn’t always an easy task but the specialists at the Hero Home Program want to help make it less stressful. They are ready to help you find the right lender, the right grants and rebates, and the right savings for your new home purchase. Contact them today to get started down the path to homeownership tomorrow.