What Does Under Contract Mean in Real Estate Listing?

Looking for a new home can be tough, especially in a competitive market. It’s challenging to find a house that meets your criteria and fits your budget. Suppose, you come across a house you like, at the right sale price, but it’s listed as “under contract”. What does that mean? And, can you still buy it? Read on to understand what does under contract mean in real estate, and what to do if you’re interested in buying such a house.

What does under contract mean in real estate?

Being under contract indicates that a seller has accepted an offer on the property, but the sale is not finalized until all conditions are met. Typically, it takes 4 to 8 weeks from the acceptance of an offer until the sale concludes.

So, what are these contingencies? Well, there are several contingencies to meet before a property sale can proceed.

Financing contingencies

This common real estate contingency involves a financing clause. The buyer must secure financing, whether through a mortgage or another source, to purchase the home. The house remains under contract until the buyer’s financing is approved by a loan lender.

Appraisal contingencies

Houses under contract may hinge on an appraisal contingency. Mortgage lenders cannot lend more than the appraised value of the property. If the appraisal falls short, the buyer may need to cover the difference between the appraised value and the sale price, adding to the expenses.

Home sale contingencies

A property can be under contract when a buyer agrees to purchase it contingent upon the sale of their current home. This arrangement prevents the buyer from managing multiple mortgage payments. However, if the buyer fails to sell their home within a specified time frame, they forfeit the opportunity to buy the new home.

Home inspection contingencies

Another common contingency for keeping a house under contract is a home inspection. The contract may allow the buyer to walk away if the inspection reveals a significant issue, such as a roof or HVAC system needing replacement. In such cases, the seller must find a new buyer willing to address these issues or undertake the upgrades themselves.

Can a prospective buyer back out of a property that is under contract?

Yes, as mentioned, buyers may be able to walk away from a home sale contract under specific conditions. Inspection, appraisal, financing, and home sale contingencies provide legal avenues for canceling a contract without losing money or facing consequences.

Additionally, buyers may have the option to cancel the contract if it includes a real estate attorney review clause. It allows them to back out within a specified period (usually three business days) after an attorney reviews the contract.

Another circumstance is if the title search reveals issues affecting ownership. These could be unpaid liens or property tax bills. Or, if a clear title cannot be provided by the seller.

Is being under contract the same as a pending sale?

A pending sale may be similar to “under contract real estate” but it’s different. In a pending sale, a home seller has accepted a buyer’s offer. At this stage, most contingencies have been addressed, and a contract has been signed. All that is left is completing the closing and the escrow process. So, during the pending status, the property sale is nearly final, though official ownership transfer has not yet occurred. Usually, sellers do not entertain backup offers once a sale is in the pending stage.

On the other hand, under contract means the seller accepted an offer with conditions to meet before closing. And, they may consider and even accept backup offers if the contract falls through.

What happens if a buyer breaches a real estate contract without a contingency?

Real estate agent and customers shaking hands together celebrating finished contract after signing about home insurance and investment loan, handshake and successful deal.

If someone, whether the buyer or seller, breaks a real estate contract without adhering to the specified terms, they could face a lawsuit. This legal action might lead to financial consequences, such as paying damages or the seller returning the buyer’s earnest money. In some cases, a court could mandate the completion of the home sale as outlined in the contract, adding potential complications and expenses to the situation.

How often does a house under contract not go through a sale?

Most home buyers rely on a mortgage loan for financing. And, if their financial situation changes before closing, they may be denied financing. An appraisal could also come in low, leading to a failed deal. Home appraisers may identify issues in the home that need fixing for health and safety, causing the deal to fall through. Specific contract terms based on a home inspection could also allow a buyer to back out. Additionally, if a buyer’s purchase is contingent on selling their current home, they might miss out if the sale doesn’t happen in time. However, this shouldn’t be a cause for worry. According to experts, real estate contracts are terminated only about 7% of the time.

Is it a good idea to submit a backup offer on a house already under contract?

More often than not, there’s a solid reason why a real estate deal falls through. It could mean a red flag for you. Understanding why the initial contract fell through is crucial to avoid potential pitfalls in your home-buying journey.

Since you’re investing time and effort in making an offer for a home with a low likelihood of success, it’s advisable to explore other properties actively on the market that might be suitable for you. That said, if you’ve found your dream home that’s under contract, you can always try to make a good offer.

A wise move would be to consult a real estate agent and determine the optimal way forward – one that finds a balance between safeguarding your interests and actively pursuing your ideal home.

Last thoughts

When a home is under contract, it means the seller accepted a buyer’s offer. However, the sale can only proceed after meeting specific conditions.

Active under-contract deals may sometimes not happen due to a failure to meet the conditions in the agreement. If a home is marked as “under contract”, the owner may be accepting a backup offer, which takes priority if the initial deal falls through.

If you’re interested in a contingent real estate listing, it’s a good idea to put in a backup offer with the help of an experienced real estate agent.

What does under contract mean in real estate: A guide was last modified: November 6th, 2025 by Ramona Sinha

Written by Ramona Sinha. November 6, 2025

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.