What does “under contract” mean?

Rates and Fees verified correct on October 21st, 2016

What does under contract means

The words “under contract” don’t necessarily mean that a property sale is a done deal. Find out more about this term here.

When you’re browsing online real estate listings, coming across the words “under contract” can feel like a kick in the guts. Especially when you find a property that looks perfect for you, only to discover that someone else has got in first with an offer.

But just because a property is under contract doesn’t mean that the sale has been finalised. In fact, there’s still a chance the contract could fall through and the property could be back on the market within hours. So let’s take a closer look at the definition for this real estate phrase.

Read more: What you need to know about contracts of sale

What exactly does under contract mean?

If a property is described as being under contract, it means that the vendor and the buyer have agreed on a price for the property and signed a contract. But that contract is still subject to conditions and could fall through before the sale is completed.

To put this another way, when a buyer places an offer on a house, it is subject to specific requirements. For example, the offer may be subject to the buyer’s ability to obtain home loan financing from their bank, to the satisfactory completion of a building and pest inspection, or to the sale of the buyer’s current home being completed. If their home loan application is rejected, if the building inspection reveals serious and potentially costly issues with the property, or if the sale of their current property falls through, the buyer is well within their rights to withdraw from the deal.

A property can only be listed as “sold” once all the conditions of the contract have been satisfied. Until then, it is either “under contract” or “for sale”.

The cooling-off period

In other situations, a buyer may simply decide that the property is not right for them and look to back out of the deal. Contracts in most states and territories incorporate a cooling-off period of around three to five business days, which means the buyer can withdraw their offer during this period.

However, financial penalties usually apply for doing so, such as the 0.25% of the purchase price charged to potential buyers that pull out in New South Wales and Queensland. Check out our guide to cooling-off periods for more information on these situations.


Even if you have a verbal agreement in place to buy a property, it is not officially “off the market” until contracts have been signed and exchanged by both the vendor and buyer. So before this happens, there is the risk of another buyer coming along and putting in a higher bid - this is known as “gazumping”.

There are several steps you can take to avoid being gazumped, such as getting loan pre-approval and organising building inspections during the cooling-off period. You can read more about these strategies in our gazumping guide.

Why are under contract properties still listed?

Under contract properties are still featured in online property listings because sale contracts can and do fall through all the time. From home loan rejections to simple changes of mind, there are plenty of reasons why a buyer may pull out of a property deal, so keeping an active listing offers a form of protection for the vendor (and the real estate agent).

If the conditions of the current contract aren’t met, the real estate agent will need to find a new buyer. Maintaining a listing on popular property websites and continuing to hold open-house inspections makes it much easier for the agent to track down another buyer if the first contract falls through.

Some agents also leave property listings up for as long as possible to generate leads for future sales, while others are simply slack when it comes to updating their listings. If you’ve made an offer on a property and it is under contract, contact the agent to ensure that this detail is included in any sale listings.

Contract of sale

Buying a property when a contract falls through

In certain circumstances, a previous contract falling over may increase your bargaining power when it comes to making an offer, such as when the vendors are keen to sell as quickly as possible. However, keep in mind that the real estate agent does not have any obligation to tell you why the previous contract was cancelled. So if there was something in the building and pest inspection that scared the first buyers off, you’ll have to arrange your own inspection to find out what that was.

Even if a property is listed as under contract, it’s still a good idea to attend an inspection and let the real estate agent know you’re interested. Not only will this action help you form a clearer picture of what’s available in your price range, but you’ll also be one of the first people the agent calls if the current contract falls apart.

Image: Shutterstock

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