WHAT DOES IT MEAN TO BE "UNDER CONTRACT"?

Congratulations on your new home!  When you are "under contract" to purchase a home, it means that you and the seller have agreed on the terms of the sale, and both parties have signed a contract that outlines these terms.  Here is a simple breakdown of what it typically means and your obligations under such a contract.

Being Under Contract

1. Mutual Agreement: You and the seller have agreed on the price, closing date, and other key terms.

2. Binding Contract:  Both parties are legally obligated to follow the terms of the agreement.

Your Obligations

1. Earnest Money: You will likely need to provide an earnest money deposit, which shows you are serious about the purchase.  This money is usually held in escrow and will be applied to the purchase price at closing.

2. Home Inspection: You usually have a period (known as the inspection contingency period) to have the home inspected.  If significant issues are found, you may negotiate repairs or a price reduction with the seller, or in some cases, withdraw from the contract without penalty.

3. Appraisal: Your lender will typically require an appraisal to ensure the home's value is at least as much as the loan amount.  If the home appraises for less than the purchase price, you may need to renegotiate with the seller or make up the difference.

4. Financing: You must secure financing (a mortgage) to pay for the home.  This is often a contingency in the contract, meaning the sale depends on your ability to get a loan.

5. Closing Costs: Be prepared to pay various closing costs, which can include fees for the loan, title insurance, taxes, and other related expenses.

6. Final Walk-through:  Just before closing, you will have the opportunity to do a final walk-through of the property to ensure it is in the agreed upon condition.

Timelines and Deadlines

* Contingency Period: These are specific time frames during which you can complete tasks like inspections, appraisals, and securing financing.

*Closing Date: This is the date you and the seller have agreed to finalize the sale, transfer ownership, and move in.

Risks and Considerations

*Contingencies: Failing to meet the contingencies or deadlines can put your earnest money at risk or could lead to the contract being voided.

Loan Approval:  If you cannot secure a loan, you may need to back out of the contract, which could result in the loss of your earnest money if it is not properly addressed in the contract.

Bottom Line:

Remember, each contract can have unique terms, so it is important to read it carefully and consult with a real estate agent or attorney if you have any questions or concerns.