What Does Active Under Contract Mean in Real Estate?

When a property is listed as “Active Under Contract” in real estate, it signifies that the seller has accepted an offer from a buyer, but the transaction is not yet finalized. This status indicates the property is spoken for, yet certain conditions or contingencies must be met before the sale can be completed. It represents a transitional phase where the agreed-upon deal is in progress but remains subject to various checks and approvals. This designation informs potential buyers that while an offer is on the table, the property is not fully off the market.

Meaning of Active Under Contract

The “Active Under Contract” status means a seller has formally accepted a purchase offer, making the agreement legally binding between the buyer and seller. However, the sale is not yet closed because the contract includes specific conditions, known as contingencies, that must be satisfied. These contingencies provide safeguards for the buyer, allowing them to withdraw from the deal without penalty if the conditions are not met.

Common contingencies include a home inspection, where the buyer evaluates the property’s condition for significant issues. An appraisal contingency permits the buyer to renegotiate or exit the contract if the home’s appraised value is less than the agreed-upon purchase price. A financing contingency allows the buyer a specified timeframe to secure a mortgage loan. If the buyer cannot obtain the necessary financing within this period, they can cancel the contract and receive their earnest money deposit back. Sellers await the fulfillment of these conditions, as the transaction is not guaranteed to close until all contingencies are cleared.

Distinguishing from Other Property Statuses

The “Pending” status means all contingencies have been met or waived, and the transaction is much closer to closing. A property listed as “Pending” is usually no longer available for showings or offers. In contrast, “Active Under Contract” implies that contingencies are still in play, and the deal is not yet as certain as a “Pending” sale.

The term “Contingent,” or “Active Contingent,” is often used interchangeably with “Active Under Contract” in many Multiple Listing Services (MLS). Both indicate that an offer has been accepted but requires specific conditions to be met. “Under Contract” without the “Active” descriptor can sometimes be synonymous with “Pending,” meaning most conditions are satisfied and the sale is near completion.

An “Under Offer” status means an offer has been submitted by a buyer but has not yet been accepted by the seller. This is a pre-contract status, where negotiations are still ongoing, and the property remains fully available for other potential buyers to submit their own offers. “Active Under Contract” stands out by confirming an accepted offer while signaling that the transaction is still in a conditional phase, open to the possibility of backup offers.

Implications for Other Interested Buyers

When a property is “Active Under Contract,” other interested buyers may still have an opportunity to make an offer. Real estate agents may continue to show the property and accept backup offers. The purpose of a backup offer is to establish a position in line, should the primary contract fall through. If the initial deal collapses, perhaps due to unfulfilled contingencies like a failed inspection or financing issues, the seller can then consider the backup offer.

A backup offer is a legally binding contract. If it is accepted by the seller, the buyer becomes next in line to purchase the home if the first offer does not close. Buyers submitting backup offers should remain aware that the original deal might still proceed, so they should continue their property search. The property is not truly off-market until all contingencies are resolved and the status changes to “Pending” or “Sold.” Sellers often find it advantageous to accept backup offers as a safety net, which can also motivate the primary buyer to fulfill their obligations promptly.

Resolution of Active Under Contract Status

Once a property is “Active Under Contract,” there are two main outcomes for the transaction. The first is a transition to “Pending” and then “Sold.” This occurs when the buyer satisfies all the contingencies outlined in the purchase agreement, such as completing the home inspection, obtaining a favorable appraisal, and securing mortgage approval. Once these conditions are met, the deal moves closer to closing, and ownership of the property is transferred to the buyer.

Conversely, an “Active Under Contract” deal might fall apart, leading the property to return to an “Active” status or be relisted. This can happen due to the buyer’s inability to secure financing, an unresolved low appraisal, or unaddressed significant issues discovered during the home inspection. If the contract is terminated due to a contingency not being met, the property re-enters the market. This requires the seller to restart marketing and offers a renewed opportunity for other interested buyers.