If you’re currently a first-time buyer, or even you’ve had experience in the real estate market before, you’ll have confronted a few examples of legal-sounding jargon that can be confusing.
One term that causes a fair amount of head-scratching is “under contract”.
You’ve no doubt have walked or driven past a property that’s been for sale and later seen the banner “under contract” plastered across the signboard. Does that mean the home has been bought or is it still for sale?
It’s actually neither one nor the other.
“Under contract” means the seller and prospective buyer have agreed on a price and signed a contract to this end. But there are usually conditions attached to the purchase, and that can leave the door slightly ajar for others if something goes wrong with the deal.
These conditions are designed to protect the buyer, and can be written into the contract in a clause called “subject to” – a solicitor will be all over this.
But you should be aware that once the buyer has signed, it’s legally binding unless there is legitimate reason to withdraw. A couple of conditions might be for the property to pass building and pest inspections, and for the buyer to acquire a mortgage.
However, these contracts protect the seller, too. The property would have to be in serious disrepair to allow a buyer to exit the deal on the basis of a failed inspection. And a failure to be granted a mortgage isn’t necessarily a handy exit clause either.
So, while a property might be labelled as under contract, it will take a significant issue for it to be put back on the market. But it can only be marked as “sold” once contracts have been exchanged and the transaction completed.
As experienced local agents, our recommendation is that if you see a home that you really like the look of that is said to be “under contract”, you should contact the sales agent. It’s likely the property sale will proceed but you never know your luck!