When a house is under contract, it means the buyer and seller have signed a purchase agreement and are both legally committed to the sale, but the deal hasn’t closed yet. Price and terms are locked in, the home is effectively off the market for new primary offers, and the clock is now running on inspections, financing, appraisal, and title work. Until those steps clear and the parties sit down at closing, the sale isn’t final, which is exactly why “under contract” is a status of its own rather than a synonym for “sold.”
What the Signed Agreement Commits Each Side To
The purchase agreement is the document that creates the under-contract status. It sets the sale price, the closing date, what’s included with the property, and any conditions that must be satisfied before the deal is final. Neither side is bound until both sign. Once both signatures are on the page, the contract is legally enforceable, and neither party can simply walk away without consequences.
For the buyer, going under contract starts an active investigation phase: booking inspections, locking in a mortgage, and reviewing the title history. For the seller, the home is pulled from active primary marketing, though backup offers can still be entertained. The seller cannot accept a higher bid from someone else while the contract is in force. If either side breaks the agreement without a valid legal reason, the other can pursue remedies, which may include keeping the earnest money or asking a court to force the sale through.
What Happens Between Signing and Closing
The under-contract period involves several overlapping tasks, most of them on the buyer’s side.
- Earnest money deposit. The buyer puts down a deposit, usually 1% to 3% of the purchase price, held in escrow by a neutral third party and applied toward the purchase at closing. If the buyer backs out without a valid contingency, the seller may keep it.
- Home inspection. A professional inspector evaluates the structure, roof, plumbing, electrical, HVAC, and other components. Buyers generally have 7 to 10 days after signing to complete the inspection. If problems turn up, the buyer can ask for repairs, a credit at closing, or a price reduction, and if the issues are serious enough and the contract includes an inspection contingency, the buyer can walk away.
- Mortgage application and Loan Estimate. Financed buyers formally apply for a mortgage. The lender must deliver a Loan Estimate within three business days of receiving the application, showing the projected interest rate, monthly payment, and closing costs.1Consumer Financial Protection Bureau. What Is a Loan Estimate?
- Appraisal. The lender orders an independent appraisal to confirm the home’s market value supports the loan amount. If the appraisal comes in low, the parties renegotiate or the buyer makes up the difference in cash. Federal law requires the lender to provide the buyer a copy of the appraisal promptly after it’s completed.2Consumer Financial Protection Bureau. 12 CFR 1002.14 – Rules on Providing Appraisals and Other Valuations
- Title search. A title company reviews public records to confirm the seller has the right to sell and to surface any liens, unpaid taxes, or other claims. Buyers typically shop for title insurance during this period, protecting their ownership if a title problem emerges later.3Consumer Financial Protection Bureau. Shop for Title Insurance and Other Closing Services
- Closing Disclosure. At least three business days before closing, the lender must deliver a Closing Disclosure with the final loan terms, monthly payment, and itemized closing costs. Certain changes after this disclosure is issued can trigger a new three-day waiting period and push closing back.4Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs
Closing costs for these services combined typically run 2% to 5% of the purchase price.5Consumer Financial Protection Bureau. Figure Out How Much You Want to Spend Buyers who don’t budget for them separately from the down payment often get caught off guard at the closing table.
How Contingencies Protect Each Side
Contingencies are conditions written into the contract that let one party cancel without penalty if something specific doesn’t work out. They are the reason an under-contract deal can still fall apart cleanly. If a contingency isn’t satisfied within its deadline, the protected party can terminate, and in the buyer’s case, usually recover the earnest money.
The common ones:
- Inspection contingency. Lets the buyer have the home professionally inspected and negotiate repairs, credits, or a lower price. If the parties can’t agree on how to handle a serious issue, the buyer can cancel. Most renegotiation during the under-contract phase happens here.
- Financing contingency. Protects the buyer if the mortgage is denied or can’t be finalized. Without it, a buyer who can’t close the loan is still on the hook and could lose the earnest money.
- Appraisal contingency. Covers the buyer if the home appraises below the purchase price. Lenders won’t loan more than appraised value, so a low appraisal creates a gap. The contingency lets the buyer renegotiate or walk.
- Home sale contingency. Makes the purchase conditional on the buyer selling their current home first. Sellers tend to view this as risky because it ties up their property while the buyer’s own sale is uncertain.
The Risk of Waiving Contingencies
In competitive markets, buyers sometimes drop contingencies to make their offers more attractive. Waiving the inspection contingency is the most common. Some buyers still inspect but agree not to ask for repairs or a price cut. Others skip the inspection entirely, which leaves them with very little recourse if an expensive problem shows up after closing. The exception would be proving the seller knew about a defect and failed to disclose it, which is a high legal bar.
Waiving a financing contingency is riskier still. If the loan falls through and there’s no contingency in place, the buyer forfeits the earnest money and may face additional liability for breach of contract.
When a Deal Falls Through
Not every contract makes it to closing, and the financial consequences depend heavily on whether a valid contingency applies.
A buyer who backs out under a contingency that hasn’t expired usually gets a clean exit. The contract terminates and the earnest money is returned. A buyer who walks after the contingency periods have passed, or who never included the relevant contingency in the first place, typically forfeits the deposit as compensation to the seller for taking the property off the market. Common ways buyers lose their earnest money: missing contractual deadlines without an extension, changing their mind outside a contingency period, or omitting a contingency that would have covered the issue. A financing failure with no financing contingency is a classic example.
A seller who tries to back out faces a steeper problem. Because courts treat every parcel of real estate as unique, a buyer can ask a court to order the seller to go through with the sale rather than just pay damages. This remedy, called specific performance, is available in most states. It’s the reason a seller can’t just accept a better offer after signing. The agreement governs both parties until it’s properly terminated under its own terms.
Under Contract vs. Pending
Listing services use both labels, but they signal different stages. “Under contract” (sometimes shown as “active under contract” or “contingent”) means the sale still has unresolved contingencies. The inspection may not have happened, financing might still be in underwriting, or the appraisal hasn’t come back. Because there’s a real chance the deal could unwind, sellers at this stage are more open to backup offers.
“Pending” means most or all contingencies have cleared. Inspection is done, financing is approved, title work is underway. The deal is close to the finish line and much less likely to fall apart. Some listings show “pending, taking backups,” though that’s less common than at the contingent stage.
For a buyer watching a specific home, the practical difference matters. A home that’s under contract with live contingencies is worth tracking and possibly offering on in backup position. A home that’s pending with contingencies cleared is much less likely to return to the market.
Backup Offers and Kick-Out Clauses
A backup offer is a signed, binding offer that sits in second position behind the primary contract. If the first deal collapses for any reason, the backup moves automatically into first position, saving the seller from relisting. Submitting a backup offer works like making a regular offer: terms, earnest money, signatures. The difference is that it only activates if the first contract dies, so don’t submit one unless you genuinely want the house at those terms.
A kick-out clause is a provision in the primary contract that gives the seller a tool for dealing with contingent offers, especially home sale contingencies. If a stronger offer comes in, the seller notifies the original buyer and gives them a deadline, usually 72 hours, to either waive their contingency and commit, or step aside. If the original buyer won’t waive, the seller moves on to the new offer and the first buyer gets the earnest money back. Some sellers push for a shorter window, as little as 24 hours, so a strong second buyer doesn’t drift away during the wait.
How Long the Under-Contract Phase Usually Lasts
From signed contract to closing day, a financed purchase typically runs 30 to 45 days. Data from mortgage technology providers puts the average around 41 days, with longer timelines when inspection renegotiations, appraisal disputes, or underwriting delays creep in. Cash purchases skip financing and appraisal and can close in as little as two weeks.
The Closing Disclosure sets a hard minimum of three business days before closing can happen, and certain changes to loan terms after it’s issued reset that clock.6eCFR. 12 CFR 1026.19 – Certain Mortgage and Variable-Rate Transactions Most delays aren’t dramatic. Someone takes three days to return a form that needed a signature, and the schedule slips. Buyers working to a tight date should stay quick on lender document requests.
Rules and timelines vary by state and by what’s written into the agreement itself, so read the purchase contract carefully and keep in close contact with your real estate agent or attorney through the under-contract period.