Imagine that after touring dozens of homes, you finally found a house that checks all your boxes – old-world charm, big backyard, close to downtown. There are absolutely no red flags. But after falling in love with it and putting in an offer, the real estate agent calls with the bad news – the beautiful home was already under contract. 

As a first-time homebuyer, you may not fully understand what “under contract” means and how it can derail your home search. In this article, we’ll run you through everything you need to know.

What Exactly Does "Under Contract" Mean For Hopeful Home Buyers? 

Essentially, this term refers to the period between when the seller accepts an offer from a buyer and the closing date. 

Here's how it works:

The process begins when the seller receives and approves an offer from a prospective buyer. This offer includes a proposed purchase price, desired closing date, and special contingencies. Once the seller signs the purchase agreement, the home is considered "under contract." 

The under-contract period typically lasts 30 days. During this due diligence period, the buyer will arrange for inspections and secure financing if needed. 

If issues arise in the inspection, the buyer can still back out of the deal without penalty. However, if no major problems are found, the sale proceeds toward the closing date. 

Should You Still Make An Offer?

If you find your dream home but it's already under contract, you still have the option to make a backup offer in most situations. 

But there are pros and cons to consider when it comes to this:

Pro: The original buyer's financing could fall through, or the inspection could turn up expensive repairs. If you're ready to move quickly, this will allow you a second chance at the home.

Con: In most cases, the original contract will progress to closing, meaning you'll have to painfully watch your dream home slip away. This emotional rollercoaster can be draining for buyers.

Under Contract As The Buyer But Want To Back Out?

What if you're the buyer who made the offer, but after going under contract, you get cold feet? This situation usually occurs if an issue pops up that you weren’t expecting.

If you want to back out of a purchase agreement, your options depend on where you are. During the due diligence period, you can typically walk away penalty-free if you find problems or change your mind. 

However, the later you back out, the more money you stand to lose. And if you wait until right before closing, you may forfeit your entire deposit. Always ask your real estate agent and conveyancer to advise you on your rights.

Final Notes

When a home is "under contract," the seller has accepted an offer, but the sale hasn't yet closed.  This crucial real estate term signals that a property will soon be off the market. 

For guidance on navigating this tricky situation, speak to an experienced real estate agent, like McKean McGregor. You could get a second chance at buying your home with the right strategy, even when the odds seem stacked against you. Contact us now to see how we can help you.