Short Answer
Overview
In real estate terminology, the status “active under contract” indicates that a seller has accepted an offer from a buyer, but the transaction has not yet closed. During this period, specific contingencies outlined in the purchase agreement must be satisfied before the sale is finalized. These contingencies often include home inspections, appraisals, and financing approval. While the property is technically under contract, it remains listed as active in the Multiple Listing Service (MLS) to inform other potential buyers that the deal is not yet complete.
History / Background
The distinction between “active,” “under contract,” and “pending” statuses evolved with the standardization of the Multiple Listing Service (MLS) systems across the United States. Historically, properties were simply marked as sold or available, which led to confusion when deals fell through after verbal agreements. As real estate transactions became more complex with legal contingencies, MLS organizations introduced granular status codes. This evolution aimed to increase transparency, ensuring that buyers knew whether a property was truly available or if there was an existing agreement that might prevent a new offer from being accepted.
Importance and Impact
This status plays a critical role in market transparency and efficiency. For sellers, it provides a layer of security while keeping options open should the primary contract fail. For buyers, it signals that a property is nearly sold but still accessible for backup offers. This impacts market dynamics by reducing wasted time on properties that are effectively sold while maintaining liquidity in case of contract termination. It also encourages competitive bidding in hot markets, as secondary buyers may position themselves to step in if the initial deal collapses.
Why It Matters
Understanding this status is essential for anyone participating in the housing market. For buyers, recognizing an active under contract listing means there is still a possibility to submit an offer, though it may be treated as a backup. For sellers, it highlights the importance of managing contingencies carefully to avoid losing the buyer. Real estate agents rely on this status to communicate accurate availability to clients, preventing frustration and ensuring that efforts are focused on viable opportunities. Ultimately, it defines the risk level associated with pursuing a specific property.
Common Misconceptions
Active under contract means the house is sold.
The house is not sold until closing; the deal can still fall through due to unmet contingencies.
You cannot make an offer on an active under contract property.
Buyers can typically submit backup offers that become primary if the initial contract terminates.
Contingencies are just formalities and always pass.
Contingencies like financing or inspection issues frequently cause contracts to dissolve before closing.
FAQ
Can I still make an offer on a home that is active under contract?
Yes, buyers can typically submit a backup offer. If the primary contract falls through due to failed contingencies, the backup offer may become the primary contract.
How long does a property stay active under contract?
The duration varies but typically lasts between 30 to 60 days, depending on the time needed to satisfy financing, inspection, and appraisal contingencies.
What causes an active under contract deal to fall through?
Common reasons include the buyer failing to secure financing, significant issues found during the home inspection, or the property appraising for less than the offer price.
Leave a Reply