You are under contract on a house the moment both buyer and seller have signed the purchase agreement and that signed acceptance has been communicated to the other side. Signatures alone don’t do it; delivery of the signed acceptance is what makes the contract binding. From that point, contingency clocks start running, deposits come due, and walking away carries real financial consequences.
How You Get There: Offer, Counteroffer, Execution, Delivery
Every purchase starts with a written offer. Real estate contracts have to be in writing and signed by the parties involved.1Legal Information Institute. Statute of Frauds A verbal agreement doesn’t bind anyone. The written document identifies the property, names the buyer and seller, states the price, and spells out the conditions of the sale.
After the buyer submits an offer, the seller can accept, reject, or counter with different terms. A counteroffer kills the original offer. If the seller counters at a higher price and the buyer later wishes they’d just taken the first number, that door is closed. The buyer would have to make a fresh offer, which the seller is free to reject.
Signing the contract is called execution, and every buyer and seller named on the deal must sign. The contract becomes binding at delivery, meaning the moment the last party to sign communicates that acceptance to the other side. If a seller signs Tuesday night and their agent notifies the buyer’s agent Wednesday morning, Wednesday is the effective date. That date is the starting gun for every deadline in the agreement, so it’s worth confirming in writing.
Most contracts today are signed electronically through platforms like DocuSign or DotLoop. Federal law gives electronic signatures the same legal effect as ink on paper.2Office of the Law Revision Counsel. 15 USC 7001 – General Rule of Validity
Under Contract vs. Pending
Listing sites use both terms, and people treat them as synonyms, but they describe different stages. A home listed as under contract has a signed purchase agreement with contingencies still outstanding. Inspections may be unfinished, financing may be unapproved, the title search may still be running. A home listed as pending has cleared all contingencies and is waiting on the closing date. Pending deals are much closer to the finish line and far less likely to fall apart.
Some sellers keep accepting backup offers while under contract, especially when the buyer has several unresolved contingencies. A backup offer sits in second position: if the primary contract collapses, the backup buyer steps in and the seller skips a relisting. Once status shifts to pending, most sellers stop entertaining new offers.
Contingencies: The Exit Ramps Built Into the Contract
Contingencies are conditions that must be satisfied before the sale can close. They give the protected party, usually the buyer, a way out with their earnest money intact if something specific goes wrong. The common ones are:
- Inspection contingency. The buyer gets a window, typically 7 to 10 days, to hire a professional inspector. If serious problems turn up, the buyer can negotiate repairs, ask for a price reduction, or cancel. Standard inspections don’t cover radon, mold, or pests; those require separate specialists.
- Financing contingency. If the lender denies the loan or can’t offer the agreed terms, the buyer can exit without losing their deposit.
- Appraisal contingency. The lender orders an independent appraisal. If it comes in below the purchase price, the buyer can renegotiate, cover the gap in cash, or cancel.
- HOA document review. In a community with a homeowners association, the buyer gets a set period to review bylaws, financial statements, meeting minutes, and rules, and can back out if something looks wrong.
- Home sale contingency. If the buyer needs to sell their current home first, this clause gives them a timeframe to do it. If the existing home doesn’t sell in time, they can terminate the new purchase.
Home sale contingencies weaken an offer in a competitive market because they add uncertainty. Some buyers avoid them by using bridge loans or by waiting until their current home is already under contract before making an offer.
What to Do in the First Days Under Contract
The effective date triggers a cascade of deadlines. Missing any of them can cost money or end the deal.
Deposit the Earnest Money
Earnest money is the buyer’s good-faith deposit, typically due within a few days of the effective date. The amount is negotiable but usually runs 1% to 3% of the purchase price; in competitive markets, buyers sometimes go higher to strengthen the offer. The funds sit in an escrow account held by a neutral third party until closing, when they’re applied to the down payment or closing costs.
Schedule the Home Inspection
With only 7 to 10 days on the inspection clock, book the inspector early. A standard inspection covers structure, roof, electrical and plumbing systems, HVAC, and major appliances. It does not cover radon, asbestos, lead paint, or mold. If any of those are a concern, hire separate specialists, and get the testing done inside the same contingency window unless the contract says otherwise. Fees for a typical single-family inspection run a few hundred dollars, with specialized tests adding more.
Apply for the Mortgage
If the contract has a financing contingency, formally apply for the mortgage and give the lender a copy of the signed purchase agreement. The lender uses it to start underwriting and to order the appraisal.3U.S. Bank. Mortgage Underwriting Process Pre-approval speeds this up, but the full application tied to the specific property happens after signing.
Get the Title Search Started
A title company or attorney examines public records to confirm who legally owns the property and whether any claims exist against it. The search reviews deeds, mortgage records, tax records, court judgments, and easements. If it turns up a tax lien, an unresolved judgment against the seller, or an easement that limits use of the property, those issues have to be cleared before closing. The title company then issues a preliminary commitment for title insurance, which protects the buyer and lender from ownership disputes that surface after the sale.
Watch for an Attorney Review Period
A handful of states build in an attorney review window after execution. New Jersey allows three business days, Illinois five, during which either side’s attorney can request changes or cancel. Where this applies, the contract isn’t fully locked even after both parties have signed.
When “Time Is of the Essence” Is in the Contract
Many purchase agreements include a “time is of the essence” clause, and it changes the stakes of every deadline. Without it, missing a date by a day or two might just mean rescheduling. With it, every deadline becomes a hard legal obligation. A buyer who fails to close on the specified date, deliver required documents, or meet a contingency deadline can be declared in default, which opens the door to losing earnest money or facing a lawsuit.
Sellers in competitive markets sometimes insist on the clause to filter out buyers who can’t move quickly. If your contract has one, treat every calendar date as immovable, and talk through the timeline with your lender, inspector, and agent before you sign.
What Happens If Someone Walks Away
Backing out without the cover of a contingency has real consequences. The remedy depends on who breaches and what the contract says.
- Liquidated damages. Many contracts state upfront that if the buyer defaults, the seller keeps the earnest money. This spares the seller from proving exact losses. The deposit doesn’t release automatically, though. Both parties have to agree on the release of escrow funds, and disputes often require mediation or a court order to resolve.
- Actual monetary damages. Without a liquidated damages clause, the non-breaching party can sue for provable losses. For a seller, that might be the gap between the contract price and the eventual sale price, plus carrying costs during the delay. For a buyer, it could include inspection fees, appraisal costs, and expenses tied to finding alternative housing.
- Specific performance. Because every piece of real estate is legally unique, courts can order a breaching party to complete the sale rather than just pay money. Buyers win these claims more often than sellers, since a buyer can’t find an identical property, while a seller mostly cares about getting paid.
Earnest money stays in escrow during any dispute. Neither party can take it unilaterally, and contested deposits can take months to resolve through mediation, arbitration, or litigation depending on what the contract requires.
How Long From Under Contract to Closing
The average timeline from signed contract to closing runs about 44 days for a financed purchase. Cash deals move faster because there’s no lender underwriting or appraisal to wait on. Delays most often come from a low appraisal, a lender asking for more documentation, or title issues that need clearing. Build some buffer into any planned moving date, because even smooth transactions occasionally slip by a week.