Buying a house is a significant investment, and it can be both exciting and nerve-wracking. Once you find your dream home and make an offer, the next step is to go under contract. But how long can a house be under contract? In this article, we will explore everything you need to know about the length of time a house can be under contract, and what factors can influence the duration of this period. The length of time a house can be under contract can vary, but understanding the contingencies and obligations during this period can help both parties prepare for a successful closing.
I. Understanding the Under Contract Period
A. Definition of Under Contract
The term “under contract” refers to the period after a seller accepts a buyer's offer, but before the sale is finalized at closing. During this time, both the buyer and seller are legally bound to follow through with the terms of the contract.
B. Purpose of Under Contract
The purpose of the under-contract period is to allow both parties to fulfill any contingencies and prepare for closing. This period protects the interests of both parties and ensures a smoother transaction.
C. Length of Under Contract: How Long Can a House Be Under Contract?
The length of the under-contract period can vary, but it typically lasts between 30 to 60 days. However, the duration can be influenced by several factors, such as contingencies, negotiations, and local regulations. For example, in some states, there may be mandatory waiting periods or disclosures that can affect the length of the under-contract period.
Additionally, the type of financing being used, such as FHA or VA loans, can also impact the length of the under-contract period. It's important for buyers and sellers to have a clear understanding of the expected duration of the under-contract period and to communicate any concerns or issues with their real estate agent.
II. Factors that Affect the Length of Under Contract
A. Home Inspection Contingency
One of the most common contingencies that can affect the length of the under-contract period is the home inspection contingency. This contingency allows the buyer to have the home inspected and negotiate repairs or credits with the seller. The length of this contingency period can vary, but it typically lasts between 7 to 10 days. If significant repairs are needed, it can prolong the under-contract period as negotiations continue.
B. Financing Contingency
Another factor that can impact the length of the under-contract period is the financing contingency. This contingency allows the buyer to secure financing for the home purchase, and the length of the contingency period is typically 30 days. However, if the buyer encounters financing issues, such as a low appraisal or loan denial, the under-contract period can be extended while they work to resolve the issue.
C. Appraisal Contingency
The appraisal contingency allows the buyer to have the home appraised to ensure that it's worth the purchase price. The length of this contingency period is typically 10 days, but it can be longer if a second appraisal is needed or if there are issues with the initial appraisal. If the appraisal comes in lower than the purchase price, negotiations may need to take place to determine the next steps, which can extend the under-contract period.
D. Title Search Contingency
The title search contingency allows the buyer to ensure that there are no issues with the property's title, such as liens or ownership disputes. The length of this contingency period is typically 14 days, but it can be longer if issues arise. If there are issues with the title, the under-contract period may need to be extended to allow time for resolution.
III. What Happens During the Under Contract Period?
A. Seller's Responsibilities
During the under-contract period, the seller is responsible for making any agreed-upon repairs or credits, as well as providing any necessary disclosures about the property. They must also allow the buyer to conduct inspections and ensure that the property remains in the same condition as when the contract was signed.
B. Buyer's Responsibilities
The buyer is responsible for securing financing, completing any required inspections, and ensuring that the property is in the expected condition. They must also provide any necessary documentation to their lender and complete any other requirements outlined in the contract.
C. Closing Preparations
As the under-contract period comes to an end, both the buyer and seller must complete final preparations for closing. This may include arranging for a final walkthrough of the property, providing proof of insurance, and completing any necessary paperwork.
IV. What Happens If the Under Contract Period Expires?
A. Options for Buyers
If the under-contract period expires without a successful closing, the buyer has several options. They may be able to extend the under-contract period if both parties agree, or they may choose to terminate the contract and seek other options.
B. Options for Sellers
If the under-contract period expires without a successful closing, the seller also has options. They may choose to relist the property, negotiate a new contract with the buyer, or take the property off the market altogether.
C. Potential Consequences
If either party fails to fulfill their obligations during the under-contract period, there can be potential consequences. For example, if the seller fails to make agreed-upon repairs, the buyer may be able to terminate the contract. On the other hand, if the buyer is unable to secure financing, the seller may be able to keep their earnest money deposit. It's important for both parties to understand their obligations and communicate effectively to ensure a successful closing.