Understanding Real Estate Jargon: Under Contract vs. Escape Clause vs. Taking Backups

Greetings, fellow Home Buyers and Sellers! As a seasoned licensed Realtor and proud member of the National Association of Realtors in Arkansas, I'm excited to shed light on some common real estate jargon that often perplexes our clients: Under Contract, Escape Clause, and Taking Backups. Understanding these terms is crucial for navigating the real estate market with confidence, so let's dive in.

1. Under Contract:

When you hear the term "Under Contract," it means that a buyer and a seller have reached mutual acceptance on the terms of the sale, and a legally binding contract has been executed. In simpler terms, the property is no longer actively available for sale, as it has already been earmarked for a specific buyer. However, it's essential to note that "Under Contract" doesn't necessarily mean the deal is fully closed; there are still a few steps to go through, such as inspections, appraisals, and securing financing, before the property officially changes hands.

As a buyer, when you encounter a listing marked as "Under Contract," it means that the chances of you buying that specific property have diminished significantly. However, it's not impossible, as deals can fall through due to various reasons, giving rise to the concept of "Taking Backups."

2. Escape Clause:

An Escape Clause, also known as a Kick-Out Clause, is a provision often included in a purchase contract, primarily when a buyer needs to sell their current home to finance the purchase of the new one. This clause essentially allows the seller to continue marketing the property and accept backup offers from other potential buyers.

If a backup offer comes in and the seller wishes to accept it, they must notify the original buyer and provide them with a specific period, usually 24 to 72 hours, to remove their contingency (i.e., sell their home) and proceed with the purchase. If the original buyer fails to do so within the specified time frame, the seller can "kick out" the original contract and proceed with the backup offer.

Escape Clauses can be beneficial for sellers who want to keep their options open while still honoring the original buyer's interest. For buyers, it's essential to be aware of the presence of an Escape Clause and understand the implications it may have on the purchase process.

3. Taking Backups:

When a property is marked as "Under Contract, Taking Backups," it means that the seller has accepted an offer and is officially under contract with a buyer. However, the seller is still willing to entertain backup offers from other interested parties. This approach ensures that if the current deal falls through due to unforeseen circumstances or the activation of an Escape Clause, the seller has other potential buyers waiting in line to step in.

For buyers, seeing a property listed as "Taking Backups" provides a glimmer of hope that they might still have a chance to purchase the property, but it's essential not to get overly attached and remain realistic about the odds.

In Conclusion, navigating the real estate market requires familiarity with its specific terminology. Understanding the differences between "Under Contract," "Escape Clause," and "Taking Backups" will empower you to make informed decisions as either a buyer or seller. As always, partnering with a licensed Realtor can be invaluable in guiding you through the nuances of these concepts and ensuring a smooth real estate transaction. Happy house hunting!

Thank you for reading our blog post! If you have any questions or need further clarification, feel free to reach out. We're here to help you with all your real estate needs.