What does under contract mean in real estate?
If you’re scrolling through property listings, you’ve probably come across this term and wondered if the house is still up for grabs. It’s a common phrase, but it can be confusing.
Does it mean the property is sold, or is there still a chance to make an offer?
In this article, let’s go over important things you need to know, including how it works in NSW, why deals sometimes fall through, and when it might be worth pursuing a property that’s already under contract.
What Does ‘Under Contract’ Or “Under Offer” Mean In Real Estate?
When a property is listed as “under contract” or “under offer,” it means an offer has been made and accepted by the owner. Both the homebuyer and seller have signed a contract of sale.
However, this doesn’t necessarily mean the property is completely sold and off the market.
In New South Wales, when a property goes under contract, it typically enters a cooling-off period. By default, every sale contract comes with a five-day cooling-off period unless the parties negotiate a different timeframe.
During this time, the buyer conducts their due diligence, finalises their formal loan approval, arranges pest and building inspections, and generally gets everything in order before unconditionally committing to the purchase.
If something doesn’t check out, the cooling-off period allows buyers to walk away from the deal for a small cost (usually 0.25% of the purchase price). So, there’s still a small window for the property to come back on the market.
It’s important to note that not all properties listed as “under contract” will show this status online. Some agents leave listings marked as “for sale” even if they’re under contract, so it’s always worth calling the agent to confirm the property’s status.
Can You Make An Offer On A Property That’s Already Under Contract?
If you’ve fallen in love with a property that’s under contract, you might wonder if you can still throw your hat in the ring. The answer is yes and no.
You can absolutely submit an offer on a property that’s under contract, and real estate agents are obligated to present all offers to the vendor.
However, suppose the contract has been legally entered into and consideration paid (typically that 0.25% deposit). In that case, the vendor cannot accept your offer or enter a new contract because they’re already legally committed to another purchaser.
That said, if the original buyer rescinds the contract and walks away from the deal, you would be first in line to open up discussions with the seller.
At that point, you could reaffirm your offer and potentially move forward with the purchase.
How Common Is It For Properties To Return To Market?
I wouldn’t say it’s very common for properties under contract to return to market, and there’s good reason for that. As a buyer (or buyer’s agent), you typically try to do as much due diligence as possible before entering a contract because walking away costs money.
For example, if the purchase price is a million dollars and you decide to walk away during the cooling-off period, you’ll forfeit $2,500 (0.25%).
That’s not a decision anyone makes lightly.
However, sometimes it makes financial sense to forfeit that deposit.
If your pest and building inspection uncovers issues requiring $50,000 worth of work, walking away and losing $2,500 might be the smarter financial decision—especially if the vendor isn’t willing to renegotiate the price.
Are “Back On Market” Properties Red Flags Or Opportunities?
When you see a property that was under contract return to the market, it doesn’t automatically mean there’s something wrong with the property.
Often, the issue lies with the purchaser’s situation rather than the property itself.
For instance:
- The initial buyer might have had their finances fall through
- They may have offered more than what the bank was willing to lend based on valuation
- They might have discovered they couldn’t borrow as much as they thought
These scenarios don’t necessarily reflect the property’s value or condition. However, if a property comes back on the market because of issues discovered during inspections, that’s a different story and warrants further investigation.
When Walking Away Is The Right Choice For The Buyer
Sometimes, a property comes back on the market because the buyer uncovers unexpected issues during the cooling-off period. I once entered a contract for a client, but after conducting due diligence, we discovered a significant problem that wasn’t apparent before signing. After carefully assessing the risks, my client chose to walk away, forfeiting the 0.25% deposit but avoiding costly repairs down the line.
The property eventually sold, but only after the vendor reduced the price to account for the issue we uncovered. This example shows that while it’s not common to walk away, the cooling-off period exists for this very reason—to protect buyers from unforeseen risks.
A Real Success Story: How Being Prepared Helped My Client Secure Their Dream Home
I once worked with a client who was interested in a property that was already under contract during a hot market. Rather than moving on, we maintained contact with the agent while the property remained under contract for an extended period.
The existing purchaser kept extending the cooling-off period and seemed quite non-committal to finalising the purchase. Eventually, the frustrated vendor put their foot down and gave the buyer a deadline: commit by Friday afternoon or rescind the contract.
When the original buyer got cold feet and didn’t get their act together in time, they had to rescind.
That’s when we were ready to move.
We inspected the property first thing Saturday morning, having already prepared ourselves to act quickly. I had all our ducks in a row: we reviewed the contract that same day, confirmed financing with our broker, and benefitted from the pest and building inspection that had already been completed.
This preparation allowed us to make an unconditional offer that same afternoon, waiving the cooling-off period entirely.
Not only did we secure the property, which was my client’s dream home, but we also negotiated a slightly better price because the vendor was frustrated after being strung along for three and a half weeks and was eager to finalise a deal.
Final Thoughts
Grasping what “under contract” means provides you with an advantage in the property market. While it’s not extremely common for properties to return to market after going under contract, it does happen—and being ready when it does can lead to fantastic opportunities.
My experience has shown that preparation and maintaining good relationships with selling agents can make all the difference. When that dream property suddenly becomes available again, you want to be the first person the agent calls, and you want to be ready to act decisively, just as my client did.
Remember, seeing “under contract” doesn’t necessarily mean “sold”—it simply means the game isn’t completely over yet.
Looking for expert guidance in purchasing property? Contact me today for personalised assistance with your property purchase.
