What Does Active Under Contract Mean in Real Estate?

In real estate, understanding property statuses is important for both buyers and sellers. “Active under contract” indicates a specific stage in the home sale process where an offer has been accepted, but the transaction is not yet complete. This status signals the home is progressing towards a sale, with conditions to be met before ownership transfer can finalize.

Understanding the “Active Under Contract” Status

When a property is listed as “active under contract,” the seller has formally accepted a purchase offer. “Under contract” means a legally binding agreement is in place, outlining sale terms. The “active” designation indicates the listing remains visible, often to solicit backup offers. This status differs from “pending” or “sold” because the deal is not yet finalized and remains contingent on specific conditions.

For the seller, this status means they have a committed buyer, but the waiting period for contingencies to clear begins. They must adhere to the initial agreement. For the primary buyer, their offer has been accepted, and they are now proceeding with due diligence and securing necessary approvals, such as financing. This phase ensures both parties are protected by allowing conditions to be met before the sale becomes absolute.

Navigating Contingencies During the Contract Period

The “active under contract” status exists because the sale is subject to various contingencies—conditions that must be satisfied for the contract to proceed. These clauses protect buyers by allowing them to withdraw without penalty if specific requirements are not met. Common contingencies include home inspection, financing, appraisal, and sometimes the sale of the buyer’s current home.

A home inspection contingency grants the buyer a period to have the property professionally inspected. If significant issues are discovered, the buyer can negotiate repairs, request a price reduction, or terminate the contract and receive their earnest money deposit back. A financing contingency allows the buyer a period to secure mortgage approval. If the buyer is unable to obtain the necessary loan within this timeframe, they can exit the contract without forfeiting their deposit.

An appraisal contingency protects the buyer by ensuring the property’s value, as determined by a professional appraisal, is at least equal to the agreed-upon purchase price. Lenders will only finance up to the appraised value, so if the appraisal comes in lower, the buyer can renegotiate the price or withdraw from the deal. A less common but important contingency is the sale of the buyer’s current home, which makes the new purchase dependent on the successful sale of their existing property by a specified date. This provides a safety net for buyers who need the proceeds from their current home to fund the new purchase.

Submitting Backup Offers and Other Buyer Considerations

While a property is “active under contract,” sellers may still entertain backup offers. A backup offer is a legally binding contract that positions a second buyer to purchase the home if the initial agreement falls through. Sellers might accept backup offers to ensure they have another buyer ready without having to re-list the property if the first deal collapses.

For a potential buyer, submitting a backup offer provides an opportunity to secure a desirable property already under contract. If the primary contract is terminated, the accepted backup offer automatically moves into the primary position. Buyers interested in a property with this status should work closely with their real estate agent to monitor its progress and be prepared to act quickly if the primary deal fails. A backup offer is a formal commitment, often requiring an earnest money deposit, similar to a primary offer.

Transitioning from Contract to Close

Once all contingencies outlined in the purchase agreement have been met or waived, the property transitions closer to its final sale. The status may change from “active under contract” to “pending,” signifying that the remaining steps are largely procedural and the sale is highly likely to close.

The final stages of the transaction involve several key steps. Buyers move toward final loan approval, with the lender verifying financial information and issuing a clear-to-close. A title search is conducted to examine public records, ensuring the property’s legal ownership is clear and free of any undisclosed liens or claims.

The closing date is then scheduled, and a final walk-through of the property occurs to confirm its condition and that any agreed-upon repairs have been completed. At the closing appointment, legal documents are signed, and the buyer provides their down payment and closing costs. Upon completion of these steps, the deed is recorded, and ownership is officially transferred.