What Does Active Contingent Mean in Real Estate?

Real estate transactions involve various listing statuses that indicate a property’s current stage in the sales process. These statuses help potential buyers understand whether a home is available, under negotiation, or sold. Among these classifications, “active contingent” frequently generates questions for those navigating the housing market. Understanding this designation is important for buyers, as it signals a unique opportunity or a potential hurdle.

Defining Active Contingent

The term “active contingent” in real estate signifies that a property is currently under contract with a buyer, but the finalization of the sale is dependent upon specific conditions being met. This status differs from “pending,” where all contingencies have been satisfied, and the sale is moving directly towards closing. The “active” component indicates that the seller is still marketing the property and remains open to showing it to other interested parties. This allows the seller to potentially receive and accept backup offers, serving as a protective measure should the primary contract encounter issues.

The “contingent” aspect means the sale is conditional, pending the successful fulfillment of certain criteria agreed upon by both the buyer and the seller. These conditions, known as contingencies, are protective clauses written into the purchase agreement. For instance, if a financing contingency is not met because the buyer cannot secure a loan, the buyer might withdraw without penalty, allowing the seller to seek another buyer. If any agreed-upon conditions are not satisfied within a specified timeframe, the initial contract can be terminated without penalty to the buyer, potentially allowing a backup offer to proceed.

For sellers, maintaining an “active contingent” status keeps the property visible to other potential buyers. This allows them to continue marketing the property and secure a backup buyer, reducing the impact if the current deal falls through. For other interested buyers, this status presents an opportunity to pursue a property that is under contract but not yet fully sold. It signals that while a deal is in progress, there remains a chance for them to step in.

Common Contingencies

Several common contingencies can be included in a real estate contract, making a listing “active contingent” until their resolution.

An inspection contingency grants the buyer the right to have the property professionally inspected within a specified timeframe, often 10 to 14 days after contract signing. If significant issues are discovered, the buyer can negotiate repairs, request a price reduction, or withdraw from the contract without losing their earnest money deposit.

An appraisal contingency stipulates that the property must appraise for at least the agreed-upon purchase price. Lenders require an appraisal to ensure the property’s value supports the loan amount. If the appraisal comes in lower, the buyer may renegotiate the price, pay the difference in cash, or exit the agreement. This protects both the buyer from overpaying and the lender.

A financing contingency protects the buyer by making the sale dependent on their ability to secure the necessary mortgage loan within a set period, 30 to 45 days. This allows the buyer time to get loan approval. If the buyer cannot secure the loan, they can exit the contract without penalty. This contingency often includes a loan commitment deadline for firm approval.

The sale of buyer’s home contingency is common, particularly for buyers needing equity from their current home to fund the new purchase. This clause means the buyer’s purchase of the new property is conditional on them successfully selling their existing home by a specific date, often within 30 to 60 days. If the buyer’s home does not sell within the agreed timeframe, they have the option to terminate the contract.

Making an Offer on an Active Contingent Property

For a buyer interested in a property listed as “active contingent,” the initial step involves consulting with their real estate agent to understand the specific contingencies in place. While the property is under contract, the existing deal could still fall through, creating an opportunity for a new buyer. Understanding the nature of the current contingencies, such as a lengthy home sale contingency, can provide insight into the likelihood of the primary contract failing.

Buyers can submit a backup offer, which is a formal offer to purchase the property should the initial contract terminate. This offer becomes primary only if the first agreement does not close, often due to unmet contingencies like a failed appraisal or inability to secure financing. A backup offer includes its own set of terms and conditions, similar to any standard purchase agreement, and requires an earnest money deposit.

This approach allows a buyer to secure a potential claim on the property without further delays if the opportunity arises. Buyers should be prepared for the possibility that the initial contract will proceed to closing, in which case their backup offer would not be activated.