What does it mean when a house is under contract on Zillow?
You’re losing track of time as you aimlessly peruse the houses you’ve saved on your phone as possible dreams. Out of the blue, you see that the house you’ve always wanted to buy has just gone under contract. Your heart sinks. You intended to submit an offer. What now?
A home’s status as “under contract” shouldn’t put you off hunting for a new place to call home. There will be times when deals fall through, and sellers may take backup offers.
But there are some important things you need to know before you start thinking about your choices. To clarify, what exactly does “under contract” mean? What is the difference between that and listings that are “pending”? Once a seller enters into a contract with another buyer, what are the odds of you even having a chance? Buyers should be aware of the following.
What it means to be “under contract” when buying a house
An “under contract” listing indicates that the seller has agreed to a bid but is still waiting for certain conditions to be met before closing.
A real estate deal can include stipulations known as contingencies. The sale can proceed if all the conditions of the contract are satisfied. The buyer can retain their deposit even if a condition isn’t satisfied; they can simply back out of the contract. One of the most common ways purchasers safeguard themselves when buying a house is by establishing contingencies.
Prior to beginning your house-hunting, it is wise to educate yourself on a few frequent contingencies.
- Contingent financing: Homebuyers typically need to arrange financing unless they have all of the cash on hand. The deal will not go through unless they secure sufficient funding.
- Potential evaluation result: Lenders will not approve a mortgage for a sum greater than the home is actually worth; thus, an appraisal is necessary to verify the value of the property. The buyer has three options: pay the difference themselves, try to renegotiate with the seller, or just walk away if the evaluation comes in less than the purchase price.
- Assessment of the home: The purchaser has the opportunity to engage a qualified home inspector to “look under the hood” of the property during the specified time frame of this contingency. There are three options available to the buyer in the event that the inspection finds significant issues: renegotiation, repair requests, or contract termination.
- Home sale: For those looking to sell their current house, this is a good option, especially if they are trying to avoid paying down two mortgages at once. In order to go forward with the purchase of the next property, a home sale contingency allows the buyer a certain amount of time (often 30 to 90 days) to sell their prior residence. The buyer has the option to back out of the deal if they are unable to sell their current home by the specified date.
‘Active under contract’
A seller who is “active under contract” has accepted a bid but is still open to other offers. Given that nothing is official until closing, the seller may be being extra cautious due to concerns about the stability of their current contract or simply because they want to be sure everything is in order. In any event, if the listing for the home you’re interested in says “active under contract,” you might want to consider submitting a backup offer. Being on the list ensures that you are prepared to proceed in the event that the present buyer drops out.
When is a sale pending as opposed to being “under contract”?
If a deal is “pending,” it usually indicates that all contingencies have been satisfied and closing is imminent, as opposed to “under contract,” which normally indicates that there are still remaining contingencies to resolve. It is less common for pending listings to accept backup bids.
But wait, there’s a catch. The words “pending” and “under contract” might mean the same thing at times. Therefore, the seller may be open to other bids or the deal may not be finalized simply because a property is posted as pending. If you need additional information, have your agent contact the seller. Consider all of your possibilities; it can never hurt.
Help! The home of your dreams is already under contract! What now?
The listing for the charming cottage outside of town is showing as “pending” or “under contract,” and you’re in a rush to place a bid. How do you proceed? The moment has come to act. Send a message to the seller’s agent through your real estate agent. You should inquire as to whether they are taking backup offers and if so, whether your application is being reviewed. Furthermore, your agent should inquire as to the seller’s priorities in order to ensure that you submit the most competitive bid upon approval.
When considering backup offers, it’s important to remember a few factors. One problem is that you can be let down because the seller’s previous offer probably won’t fall through. Second, you may lose out on houses that are more easily accessible while your offer is still pending.
It could be worth a shot, though. If you don’t put in an offer, you will most certainly lose out on the house. Discuss your options with your agent to find a middle ground that will allow you to confidently pursue your ideal house while also safeguarding your interests.
How frequently do contracts not go through?
Sometimes, real estate contracts don’t go through. About seven percent of real estate contracts end in failure, according to statistics from the REALTORS Confidence Index Survey in January 2022. They fall through for the following reasons:
- Concerns with the home inspection (25%)
- Concerns about funding (21%)
- Problems with evaluations (15%)
- Contingency problems (5%)
- Problems with title or deed (3%)
- Buyer lost their job (2%)
- Other (29%)
Therefore, if the present buyer has problems, your ideal home may become available. What are the odds? Nearly all sales (around 93%) end in a closed deal. On the other hand, if the buyer’s financial situation is precarious or if the inspection turns out to be flawed, your prospects of success may improve.
This highlights the significance of your agent gathering as much information as possible from the seller. You have no idea if the current agreement is solid unless you check.
Wrapping up
Is the dreaded “under contract” designation preventing you from viewing a listing you’re interested in? Perhaps you are not completely out of luck just yet. If a seller is taking backup offers, it’s likely because there are unmet buyer contingencies in the deal. Even if contract termination occurs only around 7% of the time, contacting the seller to inquire about placing a bid is still a good idea. Together with your agent, create an appropriate plan that safeguards your interests.
