The process of buying or selling a home is one of the most significant financial transactions many people will ever experience. It’s a journey filled with excitement, anticipation, and sometimes, confusion. One term that often comes up during this process is a house being “under agreement.” If you’ve ever wondered what it means when a house is under the agreement, you’re not alone. This term is a crucial part of the real estate process, and understanding it can help buyers, sellers, and even real estate professionals navigate the transaction more effectively.
When a house is labeled as “under agreement,” it signifies a pivotal stage in the home-buying process. It means that the buyer and seller have reached a legally binding agreement, but the sale isn’t final yet. This status can have significant implications for both parties involved, as well as for other potential buyers who may still be interested in the property.
Defining “Under Agreement” in Real Estate
What Does “Under Agreement” Mean?
In real estate, the term “under agreement” refers to a property that has a signed and accepted offer between the buyer and the seller. This means that both parties have agreed on the terms of the sale, including the price, contingencies, and other conditions. At this stage, the property is no longer actively marketed to potential buyers; however, the sale has not yet been finalized.
Other terms often used interchangeably with “under agreement” include:
- Under contract
- Contingent
- Pending
- Active with contract
While these terms are similar, they can have slight differences depending on the real estate market or region. For example, “contingent” often indicates that the sale is dependent on certain conditions being met, such as a home inspection or financing approval.
Key Characteristics of “Under Agreement”
- Legally Binding Agreement: Once a property is under contract, the buyer and seller are legally obligated to fulfill the terms of the agreement unless contingencies permit termination.
- Off the Market: The property is typically removed from active listings, signaling that it is no longer available for new offers.
- Not Finalized: The sale is still subject to contingencies and other conditions that must be met before closing.
Differences Between “Under Agreement,” “Contingent,” and “Pending”
- Under Agreement: A general term indicating that a contract has been signed.
- Contingent: The sale is dependent on specific conditions being met, such as passing inspections or securing financing.
- Pending: All contingencies have been satisfied, and the sale is moving toward closing.
Understanding these distinctions is essential for anyone involved in a real estate transaction, as they indicate the property’s position in the sales process.
The Process Leading to a House Being Under Agreement
Step-by-Step Journey to “Under Agreement”
You may also read (can i pause my house real estate license anytime).
The process of a house becoming “under agreement” involves several key steps:
- Buyer Finds a Property: The journey begins when a buyer identifies a property they’re interested in purchasing.
- Submitting an Offer: The buyer submits a formal offer, which includes the proposed purchase price and any contingencies.
- Negotiation: The seller reviews the offer and may negotiate terms, such as the price or closing date.
- Acceptance and Signing: Once both parties agree on the terms, they sign a purchase agreement, officially putting the house “under agreement.”
Role of Real Estate Agents
Real estate agents play a crucial role in facilitating this process. They help buyers craft competitive offers and guide sellers in evaluating and negotiating terms. Their expertise ensures that the agreement is fair and legally sound.
Common Contingencies in Real Estate Contracts
Contingencies are conditions that must be met for the sale to proceed. Common examples include:
- Financing Contingency: The buyer must secure a mortgage loan.
- Inspection Contingency: The property must pass a home inspection.
- Appraisal Contingency: The home’s appraised value must meet or exceed the purchase price.
- Condo Document Review: For condominiums, buyers may review association documents.
These contingencies protect both buyers and sellers, but they also introduce uncertainty. If a contingency isn’t met, the agreement may be terminated, and the property could return to the market.
What Happens After a House Is Under Agreement?
The Post-Agreement Phase
Once a house is under agreement, the transaction enters a critical phase. Here’s what typically happens:
- Due Diligence Period: The buyer conducts inspections, secures financing, and ensures all contingencies are satisfied.
- Active Under Contract: In some cases, the property is listed as “active under contract,” indicating that backup offers may still be accepted.
- Clearing Contingencies: If all contingencies are met, the sale moves forward. If not, the agreement may fall through.
What If Contingencies Aren’t Met?
If a contingency isn’t satisfied, the buyer or seller may have the right to terminate the agreement. For example:
- A failed inspection could lead the buyer to withdraw from the transaction.
- If financing falls through, the buyer may be unable to complete the transaction.
In such cases, the property often returns to the market, giving other buyers an opportunity to make an offer.
Final Steps Toward Closing
Once all contingencies are cleared, the transaction moves toward closing. This involves:
- Finalizing the mortgage.
- Completing a title search.
- Signing closing documents.
At this point, ownership of the property is officially transferred to the buyer.
Why Understanding “Under Agreement” Matters for Buyers and Sellers
For Buyers
Understanding the “under agreement” phase is crucial for buyers because:
- It represents a legal commitment to purchase the property.
- Contingencies provide protection, allowing buyers to back out if certain conditions aren’t met.
- Buyers can still submit backup offers on properties under the agreement, keeping their options open.
For Sellers
You may also read (are real estate taxes the same as house property taxes).
For sellers, this phase is equally important because:
- It signals progress toward closing but doesn’t guarantee the sale.
- Sellers must manage expectations and prepare for potential setbacks, such as contingencies falling through.
- Deciding how to list the property (e.g., “UAG” or “CTG”) can influence buyer interest.
By understanding this phase, both buyers and sellers can navigate the transaction with greater confidence and clarity.
Tips for Buyers and Sellers During the Under Agreement Phase
For Buyers
- Stay proactive with inspections and financing.
- Communicate openly with your agent and the seller.
- Be prepared for potential delays or issues.
For Sellers
- Be transparent about contingencies and timelines.
- Prepare for backup offers in case the agreement falls through.
- Work closely with your agent to manage the process.
You may also read (what is in house financing and how does it work).
