What Is Active Under Contract in Real Estate?

Understanding a property’s listing status is crucial for both buyers and sellers. “Active under contract” indicates a specific stage in the home sale process. This designation provides insights into a property’s availability and the likelihood of a transaction moving forward. Various terms describe a home’s journey from listing to sale, each with distinct implications.

What “Active Under Contract” Means

When a property is listed as “active under contract,” the seller has accepted an offer from a buyer, and a formal purchase agreement is in place. The sale is not yet finalized. The “active” component indicates that while an initial agreement exists, the seller may still be open to receiving backup offers. This status is updated on the Multiple Listing Service (MLS) once an offer is accepted.

Both parties are legally committed to the transaction, subject to certain conditions. The property is no longer fully “active” on the market, but not yet “sold.” It remains visible to other potential buyers, signaling the current deal is not entirely guaranteed to close.

The Contingency Period

The “active under contract” phase is defined by the contingency period, during which specific conditions in the purchase agreement must be met. These contingencies act as safeguards for the buyer, allowing them to withdraw from the contract without penalty if certain criteria are not satisfied.

One common contingency is the home inspection, allowing the buyer to have the property professionally evaluated for defects. Should the inspection uncover problems, the buyer can negotiate for repairs, a price reduction, or terminate the agreement.

Another frequent contingency is the appraisal contingency, which ensures the property’s value meets or exceeds the agreed-upon purchase price. If the appraisal comes in lower, the buyer can renegotiate, cover the difference, or exit the contract. A financing contingency protects the buyer by making the sale dependent on their ability to secure a mortgage loan. If financing falls through, the buyer can cancel the agreement without penalty.

Other contingencies may include a title contingency, ensuring a clear title, and a home sale contingency, where the buyer’s purchase depends on the successful sale of their current home. The successful completion of these conditions allows the transaction to progress toward closing. If any of these contingencies are not met, the contract can be terminated, potentially leading the property to return to the open market.

Implications for Other Potential Buyers

For prospective buyers, “active under contract” means an offer has been accepted, but the opportunity to acquire the property is not entirely closed. It is possible to submit a backup offer, which would be considered by the seller if the initial contract fails to close. A backup offer provides a safety net if the primary deal falls through.

A backup offer becomes legally binding only if the first offer is terminated, often due to unmet contingencies. Sellers may encourage backup offers to maintain interest and provide leverage. Submitting a backup offer can position a buyer to secure the property if the initial transaction encounters unforeseen circumstances.

Distinguishing from Other Real Estate Statuses

Understanding “active under contract” requires differentiating it from other common real estate listing statuses. An “Active” listing means the property is available for sale, and no offer has been accepted as yet. “Active under contract” signifies an accepted offer with pending contingencies, but the seller may still accept backup offers.

The “Pending” status indicates that all contingencies have been met or waived, and the sale is moving closer to closing. At this stage, the property is usually no longer actively marketed, and new offers are not accepted. Some Multiple Listing Services (MLS) may use “Contingent” interchangeably with “active under contract.” “Sold” is the definitive status, confirming the transaction has successfully closed, and ownership has transferred.