Under Contract vs Accepted Offer: Explaining the Difference

When is a property considered ‘Under Contract’?

The short answer: When a Purchase and Sales Agreement (PSA) has been signed by both Buyer and Seller, and a deposit has been secured.

Prior to going Under Contract, it is common practice, in the Bahamas, for the Buyer’s Real Estate Agent to draft a Letter of Intent (LOI) or offer letter, which is a non-binding agreement outlining the general terms of a sale. Once the LOI is signed, this document is used in conjunction with the Listing Agreement and conveyance/deed to create the PSA, which is a binding legal document. The PSA is normally drafted by the Seller’s Attorney.

From the moment an LOI is signed by both Buyer and Seller, the property has an accepted offer. However, as previously stated, the LOI is not a binding agreement. Therefore, if the Seller’s agent is presented with subsequent offers prior to the property going Under Contract, it is the agent’s duty to submit those offers to the Seller.

Even after a property goes Under Contract, deals can fall through for a myriad of reasons; therefore a wise agent will continue to market the property and encourage ‘back-up offers’ to fall back on, should the current deal fall through. Keep in mind, a back-up offer may not be accepted by a Seller unless the contract with the previous Buyer is null & void.

Be sure to check out our Investors Guide