The implications of 'active under contract' in real estate

Suppose you’ve been searching for the right home for months and when you finally find a seemingly good fit, you see that it’s listed as “active under contract.” Does this mean the home has been sold? Can you no longer make an offer? Not quite.

You can still make an offer on a home marked “active under contract,” and you can also tour a property designated as such if the sellers are agreeable. But your odds of having your offer accepted and closing on this kind of home are typically low.

That said, let’s delve deeper into the topic of active-under-contract homes in the real estate market so you can understand the full implications of this terminology.

What does ‘active under contract’ mean?

When a home is listed as active under contract, it means the sellers have accepted an offer from a buyer but the deal is still in the early stages and hasn’t yet closed.

Oftentimes, the home’s buyers are waiting for their home inspection to make sure the property doesn’t have any major issues. 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’ve 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 and have a contingency stating they must sell their home before they close on the purchase of their new home.

How active under contract listings work

During the active under contract phase, buyers can still make offers on a home and tour it, if the sellers will allow for this. But any offer that a buyer makes – even if it’s higher than the one the sellers have already accepted – will be considered a backup offer. 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.

Why are homes listed as ‘active under contract’?

When real estate agents list a property on the multiple listing service (MLS), it will be designated as “active,” meaning 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 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 ‘active under contract’ means for sellers

Sellers can still receive offers when their home is listed as active under contract. However, 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 qualify for a mortgage loan by a set deadline – sellers can then consider any backup offers.

What ‘active under contract’ means for buyers

Buyers should know that the odds are low that they’ll be able to buy a home 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 aren’t met. For example, maybe an appraisal is too low, a home inspection reveals serious problems with the house, or buyers can’t qualify for mortgage financing.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 the original deal somehow doesn’t close.

‘Active under contract’ vs. ‘pending’ listings

There’s a difference between homes 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, where the sellers get paid and the buyers take the keys to the home.

You can try to make an offer on a home that’s pending, but most sellers won’t entertain offers at this point.

Active under contract FAQs

Below are a few frequently asked questions about active under contract listings.

When do listings change 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’s the difference between an under contract listing and an active under contract listing?

You might see the words “under contract” on a home listing. This, again, means the seller has accepted an offer and the sale must clear all contingencies before it reaches closing. “Under contract” could mean the same as “active under contract,” though the latter is a more explicit way of saying that sellers are still accepting backup offers.

Sellers with homes listed as “under contract” aren’t stating whether they’re still accepting offers. You can still make an offer on a home listed as “under contract,” although there’s no guarantee a seller will consider it.

Why don’t real estate agents remove an active under contract listing?

It makes sense for sellers to continue entertaining offers on a home even if they’ve 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 in real estate listings as contingent?

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, or the home they want to buy passing a home inspection.

A sale can also be contingent on the sellers finding a new house.

Can I make an offer on a home that’s listed 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.

The bottom line

When you see a home listed as active under contract, it doesn’t mean you’re forbidden from touring the home. You’re likely to face an uphill climb ultimately getting it, though.

If you think you want to make an offer on any house, the best first step is to consult your real estate agent.

Ready to search for a home and make an offer once you’ve found the right home for you? You can start your mortgage application online with us today.