What Does Under Contract Mean?
Under contract means a buyer and seller have signed a legally binding purchase agreement for a property, but the transaction has not yet closed. The property is no longer available for other offers (in most cases), and both parties are committed to moving toward closing subject to the terms and contingencies written into the contract. The period between signing and closing is often called the "contract period" or "pending period."
For wholesalers, getting a property under contract is the starting point for the entire deal. It's the moment you gain equitable interest in the property, which gives you the legal right to assign that contract or proceed with a double close. Without a signed contract, you have nothing to sell. Once you're under contract, the clock starts on your disposition timeline.
What happens during the contract period
The contract period is a series of deadlines and milestones that both parties must satisfy before closing. In Texas, the standard TREC 1-4 residential purchase contract includes an option period (typically 7-14 days), during which the buyer can terminate for any reason. After the option period expires, the buyer's earnest money becomes at risk if they back out without a valid contractual reason.
During the contract period, several things happen simultaneously. The title company orders a title search to verify ownership and check for liens. The buyer may order inspections, appraisals, or surveys. If financing is involved, the lender processes the loan application. And for wholesalers, this is the window for finding an end buyer, marketing the deal, and lining up either an assignment or double close.
Under contract vs. pending
On the MLS, "under contract" and "pending" are often used to describe slightly different stages. "Active under contract" (sometimes called "option pending" in Texas markets) usually means the property has an accepted offer but is still within the option or inspection period. The seller may continue to accept backup offers. "Pending" typically means all contingencies have been satisfied and the transaction is on track to close. The property is effectively off the market.
The distinction matters for investors. A property that's "active under contract" has a higher probability of falling out of contract than one that's "pending." Monitoring properties that go from under contract back to active is one way investors identify motivated sellers who have already had a deal fall through. These sellers are often more willing to negotiate on price and terms because they've already been through the emotional process of selling once.
Can you back out once you're under contract
Whether you can exit a contract without financial penalty depends on the contingencies in your agreement. Common exit mechanisms include the option period termination (Texas allows unrestricted termination during the option period for the cost of the option fee), inspection contingency (many states allow termination if inspections reveal significant defects), financing contingency (if the buyer can't obtain mortgage approval), and title contingency (if the title search reveals unresolvable defects).
After all contingencies expire, backing out typically means forfeiting your earnest money and potentially facing a lawsuit for specific performance, where the seller asks a court to force you to complete the purchase. In practice, specific performance lawsuits are rare in residential transactions because they're expensive and time-consuming. The more common outcome is an earnest money dispute.
Under contract in wholesaling
For wholesalers, the under-contract period is when all the action happens. You need to build your marketing package, blast the deal to your buyer list, field inquiries, schedule walkthroughs, negotiate with potential end buyers, and execute the assignment or set up the double close -- all before the closing deadline. Time management during this period is critical.
Experienced wholesalers pre-market deals before they're under contract by building the marketing package and identifying likely buyers based on the property's location, price point, and condition. That way, when the contract is signed, they can blast the deal immediately instead of starting from scratch. Having your disposition system ready before you have deals under contract is what separates consistent closers from occasional ones.
The contract period also determines your maximum assignment fee. If you have 30 days to close and you find a buyer on day 25, you have very little negotiating leverage. Find a buyer on day 3, and you have weeks of buffer plus multiple backup buyers creating competition. Speed in disposition equals larger assignment fees.