A contract is only fully executed (carried out)... when all of the terms of the contract have been completed. In other words, if the contract calls for an inspection, an attorney review, a mortgage contingency and then a closing. Once all of those things are complete, and you have the keys to the house in your hands, then it's been "executed".
Up until that point, as Mac points out, the contract is merely "executory"... (signed and agreed and ready to be carried out).
But I think what you're asking is "When is a contract really considered a contract?" Without knowing the particulars of your contract (which sounds like you might be attempting to purchase a short-sale), it'd be difficult to say. But in a common scenario of a short-sale, you aren't "locked-in" to the deal, until the bank agrees to accept the price that you and the owner of the house have already agreed upon.
As others have advised, in NJ we have the attorney review period during which either party can cancel a contract without recourse. If that is where you are, you are free and clear. I've had attorneys add to the contract during attorney review a clause that allows them to exit or recommt if the approval is not secured by the bank in a certain ttimeframe. I've also seen many buyers tire from the process and move on. But your question cuts to the core of your commitement at this stage and how best to exit to protect your interests. For that you need an attorney's advice.
If you have one, seek their advice. If you don't, I recommend you do - if you'd like the contact info for the attorney I mentioned, send me an email and I'll send it along. She does both short sales/foreclosures and regular transactions. I was impressed by her and plan to use her servicesin the future.
Unwavering Commitment to Service
Licensed Associate Broker NY & CT
2008 PCAR Realtor of the Year
Prudential Serls Prime Properties
If it's a short sale, the bank approval is a contingency of the contract....just like the inspection contingency.
Janet Larsen, Broker/Associate
When it is "executory," you can only "get out" as the contract allows, and this is where your attorney comes in.
All the best,