Understanding the Meaning of "Under Agreement" in Real Estate
In real estate, the term "under agreement" refers to a property that has entered into a contractual commitment between the seller and the buyer, indicating that both parties have agreed on the sale terms and are moving towards closing. This status is a significant milestone in the property transaction process, signifying that the property is no longer actively available on the open market for offers, at least until the agreement is fulfilled or terminated.
What Does "Under Agreement" Mean in Real Estate?
Definition and Basic Explanation
"Under agreement" is a designation used in real estate listings to indicate that a property has a pending sale. It is different from "for sale" or "active," which suggests that the property is still available for purchase. When a property is marked as "under agreement," it means that the seller has accepted an offer from a buyer, and both parties are working towards finalizing the sale, typically through the signing of a purchase agreement or contract.
Key Components of an "Under Agreement" Status
- Acceptance of an offer by the seller
- Execution of a purchase agreement or sales contract
- Contingencies that need to be satisfied (such as inspections, financing, or appraisal)
- Pending completion of all contractual conditions
Implications for Buyers, Sellers, and Real Estate Agents
- Buyers: May have limited opportunities to negotiate or submit offers on the property unless the agreement falls through.
- Sellers: Typically cannot accept other offers unless specified as "back-up" offers or if the current agreement is canceled.
- Real estate agents: Must update their listings and inform clients of the property's status shift.
The Process Leading Up to "Under Agreement"
1. Listing and Marketing the Property
Before a property reaches the "under agreement" stage, it is listed and actively marketed to attract potential buyers. Agents utilize various marketing channels, including online listings, open houses, and networking.
2. Offers and Negotiations
Interested buyers submit offers, which may include price, contingencies, and other terms. The seller reviews these offers and negotiates to arrive at mutually acceptable terms.
3. Acceptance and Contract Signing
Once both parties agree on the terms, the seller accepts an offer, and a purchase agreement is signed. This agreement outlines all the contractual obligations, contingencies, timelines, and other essential details.
4. Contingency Periods
After signing, there are usually contingency periods during which the buyer can conduct inspections, secure financing, or appraise the property. If issues arise during this phase, either party may renegotiate or cancel the agreement.
5. Moving to "Under Agreement"
When contingencies are satisfied or waived, and all contractual conditions are met, the transaction advances to the "under agreement" status, signifying that the sale is pending final closing.
Types of "Under Agreement" Listings
1. Pending Sale
The property has completed all contingencies and is in the final stages before closing. It is often marked as "pending" in listings.
2. Under Contract with Contingencies
The property is under agreement but still subject to certain conditions, such as inspections, appraisal, or financing approval.
3. Back-up Offers
Some properties accept back-up offers even when under agreement, providing an option if the primary deal falls through.
What Happens After a Property Is "Under Agreement"?
1. Due Diligence and Contingency Periods
During this phase, the buyer conducts inspections, appraisals, and secures financing. The seller may also complete necessary disclosures and repairs.
2. Escrow and Closing Preparation
Once contingencies are satisfied, escrow processes the transfer of funds and ownership. Both parties prepare for closing, which involves signing final documents and transferring title.
3. Potential for Contract Cancellation
If contingencies are not met or issues arise, the agreement may be canceled, reverting the property to active status and allowing the seller to accept new offers.
Differences Between "Under Agreement" and Other Common Terms
"Under Agreement" vs. "Active"
- Active: The property is available for sale and open to offers.
- Under Agreement: A sale is in progress; offers are no longer accepted unless back-up offers are allowed.
"Under Agreement" vs. "Sold"
- Sold: The transaction has been completed, and the property ownership has officially transferred to the buyer.
- Under Agreement: The sale is pending but not yet finalized.
Why Is the "Under Agreement" Status Important?
For Buyers
- Understanding that the property is no longer open to offers helps buyers avoid unnecessary negotiations.
- Recognizing the status allows buyers to focus on other available properties.
For Sellers
- Marking a property as "under agreement" informs other potential buyers that the property is close to closing, reducing inquiries.
- It also indicates progress in their selling process.
For Real Estate Agents and Market Analysis
- Tracking "under agreement" listings helps gauge market activity and demand.
- Agents can better advise clients based on transaction trends.
Limitations and Considerations of "Under Agreement" Listings
1. Not Finalized
An "under agreement" status does not guarantee that the sale will close successfully. Deals can fall apart due to inspections, financing issues, or other contingencies.
2. Back-up Offers
- Some listings permit back-up offers, which can be accepted even when the property is under agreement.
- Buyers interested in such properties should inquire about back-up offer policies.
3. Market Variability
Market conditions may influence how quickly properties move from "active" to "under agreement" and then to "sold."
Conclusion
Understanding what "under agreement" means in real estate is crucial for buyers, sellers, and industry professionals alike. It signifies that a property is in the process of being sold, with contractual obligations underway, but the transaction has not yet been finalized. Recognizing this status helps manage expectations, informs strategic decision-making, and provides insights into market activity. Whether you're a prospective buyer monitoring listings or a seller gauging market interest, knowing the implications of an "under agreement" status is essential in navigating the real estate landscape effectively.
Frequently Asked Questions
What does 'under agreement' mean in real estate?
'Under agreement' means that a buyer and seller have agreed on the terms of a property sale, and a contract has been signed, but the transaction has not yet been finalized or closed.
Is a property still available if it is marked as 'under agreement'?
Typically, no. When a property is 'under agreement,' it is usually pending the completion of conditions like inspections or financing, and it is often taken off the market to prevent other offers.
Can the 'under agreement' status be changed or canceled?
Yes, if contingencies are not met or if either party withdraws from the contract, the status can be canceled, and the property may go back on the market.
How does 'under agreement' differ from 'sold' in real estate?
'Under agreement' indicates a pending sale that is still in the process, whereas 'sold' means the transaction has been completed and ownership has transferred.
Does 'under agreement' mean the deal is guaranteed to close?
Not necessarily. 'Under agreement' means the parties are working towards closing, but certain conditions or contingencies could still prevent the sale from finalizing.
What should buyers know when a property is 'under agreement'?
Buyers should be aware that the property is not available for offers, and they might want to act quickly if they are interested, especially if the deal falls through and the property comes back on the market.
