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What Does Under-Contract Mean In Real Estate?

Understanding “Under-Contract” In Real Estate Transactions

Real estate transactions contain many terms that may be unfamiliar to those who are new to the market. One such term is the phrase “under-contract,” which can have implications for both buyers and sellers.

This article provides an in-depth look into real estate contracts and the “under-contract” phase, covering what it means, what to expect during and after, the differences between “under-offer” and “under-contract,” and the legal and ethical considerations for making an offer on an under-contract property with a real estate in Wanneroo.

Understanding The Differences Between “Under-Offer” And “Under-Contract”

The terms “under-offer” and “under-contract” are commonly used in the real estate industry, but their meaning can sometimes be confusing for those who are new to the home buying and selling process.


When a property is “under-offer,” it means that a potential buyer has made an offer on the property and the seller is considering it. This stage is also sometimes referred to as “offer pending”.


A property is considered to be “under-contract” when both the buyer and the seller have agreed on the terms and price, and both have signed a legally binding purchase agreement.

At this point, the parties involved are committed to the transaction, and backing out can result in legal consequences.

Timeline For “Under-Offer” Versus “Under-Contract” Transactions

Understanding the timeline for “under-offer” and “under-contract” transactions is essential for both buyers and sellers to manage their expectations and plan accordingly.

In the case of a property being “under-offer,” the timeline can vary greatly depending on factors such as negotiations, the number of offers, and the seller’s decision-making process. Generally, this stage can last anywhere from a few days to a couple of weeks, or even longer.

Once a property is “under-contract,” the timeline becomes more predictable, although it can still be influenced by factors such as contingencies, inspections, and financing. Typically, the time between entering into a contract and closing on a property can range from 30 to 60 days or more, depending on the complexity of the transaction.

What To Expect After A Property Is Listed As “Under Contract”

After a property is listed as “under-contract,” there are several critical steps that both the buyer and the seller must navigate before the deal can be finalised.

From inspections and appraisals to satisfying contingencies, these steps play a crucial role in ensuring a smooth and successful transaction.

 The Role Of Contingencies In Under-Contract Transactions

Contingencies are specific conditions that must be met before a property can change hands from the seller to the buyer. These are typically included in the purchase agreement to protect both parties involved in the transaction.

Common contingencies include:

Financing contingencyIf the buyer cannot obtain financing, they may have the option to cancel the contract without any penalty.
Inspection contingencyThe buyer is granted the opportunity to perform a thorough inspection of the property and utilise their findings to negotiate repairs, request modifications to the purchase price, or withdraw from the agreement without any consequences.
Appraisal contingencyThe transaction’s completion is dependent on the property’s appraisal meeting or surpassing the predetermined purchase price. In the event of a lower appraisal, the buyer may renegotiate the price or cancel the contract.

Timeline For Completing An Under-Contract Transaction

As previously mentioned, the timeline for completing an “under-contract” transaction can range from 30 to 60 days or even longer.

During the “under-contract” phase, the buyer must maintain their credit score and avoid taking on any new debts, as this can impact their ability to obtain financing.

The seller, on the other hand, should work to resolve any title issues or negotiate repairs based on the results of the property inspection.

What Is The “Cooling-Off Period” In Real Estate Contracts?

The cooling-off period allows buyers to back out of a real estate contract without penalties or legal consequences, but its duration varies depending on local laws and regulations. In Western Australia, there is no mandatory cooling-off period, so buyers should know their area’s laws and regulations before signing any contracts.

The Purpose Of A Cooling-Off Period In A Real Estate Contract

The cooling-off period protects buyers during the home-buying process and allows for flexibility in case of pressure to sign potential issues, or personal circumstances such as financing problems, property inspection findings, job loss, or family emergencies.

How Long Does A Cooling-Off Period Typically Last And What It Entails

While the duration of the cooling-off period varies depending on local laws and regulations, it generally ranges from three to five business days.

The seller may require a small percentage (usually less than 1%) of the purchase price as a penalty or ‘break fee’ from the buyer.

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Can You Make An Offer On A House That Is Under-Contract?

Buyers can make a “backup offer” or “secondary offer” on a property that is already under-contract with another party. If the primary offer falls through, the backup offer can be considered.

Legal And Ethical Considerations Of Making An Offer On An Under-Contract Property

When submitting a backup offer on an under-contract property, it is important to work with a qualified agent and approach the offer professionally. Trying to outbid the current offer or pressuring the seller can lead to legal disputes and damage to your reputation as a buyer.

Strategies For Making A Competitive Offer On An Under-Contract Property

When making a backup offer, there are several strategies you can employ to increase the likelihood of your offer being accepted:

Act quicklyThe earlier you submit your backup offer, the better your chances of being next in line if the primary offer falls through.
Work with an experienced agentChoose a real estate agent who is familiar with local regulations and has experience handling backup offers. They can provide valuable advice and guidance throughout the process.
Offer attractive contract termsMake your backup offer stand out by offering favourable terms such as a higher deposit, a shorter closing period, or fewer contingencies.
Stay informedRegularly communicate with your agent and monitor the status of the primary offer. If you become aware of any changes or delays, be prepared to move quickly.
Express your genuine interestWrite a thoughtful letter to the seller, explaining why the property is important to you and your family. Personal connections can sometimes make a difference in a competitive situation.

Can You Break A Real Estate Contract?

Situations can arise where either party wishes to break this contract, leaving many people wondering if it is even possible to do so.

Legal Implications Of Breaking A Real Estate Contract

It is crucial to understand that breaking a real estate contract can lead to severe legal consequences. These implications include but are not limited to, potential lawsuits, loss of deposit or earnest money, and harm to the buyer’s or seller’s reputation.

Let us explore some common scenarios where a party may consider breaking the contract and the possible consequences they may face.

  1. Seller’s change of heart –  If a seller changes their mind after accepting an offer and signing the contract, they may be at risk of being sued by the buyer for breach of contract. Depending on the agreement’s terms, the seller may need to pay damages, reimburse expenses, or proceed with the sale.
  2. Buyer’s inability to secure financing – If a buyer cannot secure financing after signing a contract, they may lose their deposit. However, some contracts have a mortgage contingency clause that frees the buyer from the obligation to purchase. Buyers should read and understand their contracts to know their options and potential liabilities.
  3. Unresolved inspection issues – Real estate contracts have inspection contingencies that allow buyers to back out if the seller is not willing to address significant issues. The buyer can often terminate the contract without losing their deposit, but specific terms of the agreement may impose penalties.


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