What Does ‘Active Under Contract’ Mean?
May 31, 2023 5-minute read
Author: Dan Rafter
You’ve been hunting for the perfect home for months. When you finally find your dream home, you see that is marked on the multiple listing service (MLS) as “active under contract.” Does this mean that the home has been sold? Can you no longer make an offer?
Not quite. You can still make an offer on a home that is marked “active under contract.” You can tour these properties, too, if the sellers agree. But your odds of having your offer accepted and closing on such homes are low.
‘Active Under Contract,’ Defined
When a home is listed as active under contract, it means that the sellers have accepted an offer from a buyer. But the deal is still in the early stages and hasn’t yet closed.
This often means that the home’s buyers are waiting for their home inspection to make sure that there aren’t any serious problems with the property. In other cases, the buyers might still be finalizing their mortgage financing or waiting for an appraiser to determine that the home is worth what they have agreed to pay for it.
An active under contract listing might also mean that other contingencies or requirements must be met before the sale can move ahead. Maybe the buyers are selling a home of their own. They might have a contingency stating that they must sell their home first before they close on the purchase of their new home.
During the active under contract phase, buyers can still make offers on a home and tour it, if the sellers agree. But any offer buyers make – even if they’re higher than the ones that the sellers have already accepted – will be considered a backup. Sellers generally can’t break their current purchase and sales agreement with a buyer to accept a new offer, even if it’s for more money.
If the under-contract home sale falls through, though, the sellers can consider other offers.
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Why Real Estate Agents Update Active Listings To ‘Active Under Contract’
When real estate agents list a property on the MLS, it will be listed as “active,” meaning that it’s for sale and that the sellers are accepting offers. Once the sellers and buyers agree on a sale price and sign a purchase and sales agreement, agents update the listing on the MLS to “active under contract.”
This lets buyers know that they can now only make a backup offer on the property. Buyers not interested in that will know to move on to other properties.
What This Means For Sellers
Sellers can still receive offers when their home is listed as “active under contract.” But they can’t break their existing purchase agreement and accept these new offers, no matter how enticing they might be. That’s why it’s important for sellers to only accept offers that meet all their needs.
Sellers can accept backup offers. If the original buyers fail to meet any contingencies in their signed contract – maybe they can’t sell their own home on time or they aren’t able to qualify for mortgage financing by a set deadline – sellers can then consider any back-up offers.
What This Means For Buyers
Buyers should know that the odds are low that they will be able to buy a home that is already listed as “active under contract.” That’s because the sellers of these homes have already agreed to an offer from another buyer and can only break their sales agreement if certain contingencies, such as an appraisal that’s too low, a home inspection that turns up serious problems or buyers who can’t qualify for mortgage financing, are met.
Buyers can make a backup offer, though. If the sellers and original buyers can’t close the deal, the sellers can consider any backup offers they receive. Making a backup offer can be a smart move if you really want a home and are hoping that the original deal somehow doesn’t close.
‘Active Under Contract’ Vs. ‘Pending’ Listings
There is a difference between homes that are listed as “active under contract” and those listed as “pending.”
A home sale listed as “pending” is even closer to being a done deal. In a pending sale, the buyers and sellers have satisfied all contingencies and the sale is ready to go to the closing table, when the buyers receive their mortgage loan and take the keys to the home.
You can try to make an offer on a home that is pending. Most sellers, though, won’t entertain them at this point.
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Active Under Contract FAQs
Do you have more questions about what “active under contract” means? Here are some answers to the most common:
When do real estate agents change listings from active to active under contract?
Agents move listings on the MLS to active under contract when the buyers and sellers of a home reach an agreement on a home’s sales price and sign an offer. Buyers can still make offers on such a home. If the sale falls through, the sellers can then consider these other offers.
What is the difference between an under contract listing and an active under contract listing?
You might see the words “under contract” on a home listing on the MLS. This again means that the seller has accepted an offer and that the sale must clear all contingencies before it reaches closing. “Under contract” could mean the same thing as “active under contract,” though the latter is a more explicit way of saying that sellers are still accepting back-up offers. Sellers with homes listed as “under contract” are not stating whether they are still accepting offers. You can still make an offer on a home listed as “under contract,” though there is no guarantee that sellers will consider it.
Why don’t real estate agents just remove the listing entirely?
It makes sense for sellers to continue to entertain offers on a home even if they have agreed to another offer. If the home sale doesn’t close – maybe the buyers can’t qualify for mortgage financing or they balk after the home inspection –sellers can then turn to any additional offers they’ve received.
Is active under contract the same as contingent in real estate listings?
Yes. In a contingent listing, the buyers or sellers of a home must take specific steps before the sale closes. A home sale might be contingent on buyers getting financing or selling a home. It might be contingent on the buyers ordering a home inspection. A sale can also be contingent upon the sellers finding a new house.
Can I make offers on homes that are listed as ‘active under contract’?
You can. But sellers can’t accept your offer if they’ve already signed a purchase and sales agreement with other buyers, even if your offer is higher. If the sale doesn’t reach closing, though, the sellers can consider your offer.
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