Real Estate Word of the Day: Under Contract
When a buyer identifies a property they're interested in, the first step is to make an offer. Once the seller accepts the offer, the property transitions into the under contract phase. This period is often a time of anticipation and optimism for both parties involved. Being under contract essentially means that both the buyer and seller have agreed on the terms and conditions outlined in the purchase agreement. This agreement typically includes details such as the purchase price, closing date, and any contingencies that must be met for the sale to proceed smoothly.
Contingencies, often included in the contract, are conditions that must be satisfied for the sale to move forward. Common contingencies include home inspections, financing approval, and appraisal requirements. If any of these conditions are not met, it could potentially lead to the termination of the contract. The under contract status serves as a form of protection for both the buyer and the seller. For the buyer, it means that the property is essentially reserved for them, and the seller cannot entertain other offers during this period. On the flip side, the seller gains assurance that the buyer is committed to the purchase, assuming all contingencies are met. As a show of good faith, the buyer typically provides earnest money upon entering into a contract. Earnest money is a deposit that demonstrates the buyer's seriousness about the transaction. If the deal falls through due to reasons outlined in the contract, the earnest money is usually returned to the buyer. However, if the buyer backs out without a valid reason, the seller may be entitled to keep the earnest money.
For both buyers and sellers, communication and cooperation are key during the under contract phase. Buyers should diligently work to satisfy any contingencies outlined in the contract, such as securing financing and completing inspections. Likewise, sellers should ensure the property is well-maintained and that any agreed-upon repairs are addressed promptly. The under contract phase culminates in the closing, where the property officially changes hands. The closing process involves the finalization of paperwork, the transfer of funds, and the exchange of keys. Once these steps are completed, the property is considered sold, and the under contract status is replaced with "Closed."
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