What does it mean when a house is ‘active under contract’?

Sometimes the home search process seems pretty straightforward. You look online, find houses that pique your interest, send them along to your real estate agent for further investigation, and set up an in-person showing. In most cases, the home is listed as “active,” “sold,” or “not for sale.” Again, pretty straightforward.

Every now and again you might see a status term that leaves you a bit puzzled – “active under contract” may be one of these terms. Well, fear not, we have you covered here. A property that is “active under contract” isn’t quite as available as a home that is simply “active,” but there is still a chance you might be able to eventually call it home.

“Active under contract” means that a seller and buyer have agreed on a sales price and an offer has been accepted, but the deal isn’t complete. Essentially, there are still quite a few contingencies that need to be met before the deal can close.

Listing agents change the status of a property from “active” to “active under contract” online so potential buyers and their agents understand that an offer has been accepted, but there are still a few hoops to jump through before the property is completely off the market. As a buyer, the key point to understand is that this means you might still be able to make an offer on the home.

What does ‘active under contract’ mean?

Let’s dive in a little deeper. When a buyer submits an offer and the seller accepts it, this begins the sale process. At this point the price and general parameters of the sale have been agreed upon, but there is still a long way to go before the property changes hands. For example, the buyer may make their offer contingent on a home inspection and/or the approval of their loan. This means if those contingencies are not met, the contract becomes null and void. At this point the listing online is changed to “active under contract.”

Sometimes an inspection isn’t up to the expectations of the buyer, and they can’t come to an agreement with the seller on what needs to be fixed or who should pay for it. In this case, a mutual release of the contract might be the only path forward and the property becomes available to a new buyer. Or perhaps the buyer’s loan isn’t approved by their bank, and the financing contingency of the contract is not met. Again, this might result in a mutual release.

The mutual release is the key component dictating whether you have a chance at getting the home when it’s active under contract. If you decide to put an offer on a home with this status, the seller can’t begin the sale process with you until the current deal falls through.

How ‘active under contract’ listings work

So, let’s say you see a home that is listed as “active under contract” and you want to see if you can still make an offer. Can you? The short answer is usually yes, as long as the seller is willing. Even though they have a sales agreement already in place, the seller can look at your offer and be ready to work with you if their current deal doesn't work out. In fact, the seller can accept your offer as a backup offer even while they work with their current buyer. In this case, your offer becomes an active sales contract as soon as the mutual release is signed on the current deal.

As you can probably imagine, this type of offer is less likely to get to the closing table than an accepted offer on a property listed as “active.” It also means you will have to do some waiting around to see if the current accepted offer falls apart. You can, however, continue your home search while you wait.

Why are homes listed as ‘active under contract’?

Real estate agents use a multiple listing service (MLS) to market the properties they have for sale and search for properties their buyers might be interested in. Their MLS feeds into home search websites that consumers use, like Redfin. To let people know the status of a property, agents use various terms like “active,” “active under contract,” “pending,” and “sold.” We have covered the first two, so let’s look at "pending" and “sold.”

A property listed as “pending” means that all the contingencies have been met and the only thing left is the closing. This usually means the inspection has been resolved and the loan has been approved, among other things. No use putting an offer on this property, the deal is nearly done. A property listed as “sold” means … well … it’s sold. That one is pretty self-explanatory.

What does ‘active under contract’ mean for sellers?

“Active under contract” means sellers are currently working with an offer that hasn’t fallen through but there are still contingencies, like inspection or mortgage approval, that need to be met. While the seller needs to operate in good faith with their current buyer, they can still look at other offers that come in. Usually a seller will be open to considering backup offers because it gives them peace of mind in case something goes awry with their current deal.

What does ‘active under contract’ mean for buyers?

“Active under contract” means buyers can still put an offer in on the home, but the likelihood of getting it to the closing table is significantly lower than making an offer on an active property. So should you make a backup offer? Well, that depends on your specific situation. If you’re in no hurry to move and you’re absolutely in love with the home, putting in a backup offer might make a lot of sense. If you need to find a home fast and you could take or leave the home in question, maybe a backup offer isn't the right approach.

‘Active under contract’ vs. ‘pending’ listings

If a home is listed as “pending,” the contingencies of the contract have been met and the title company, buyer, seller, and real estate agents are completing the final steps and scheduling the closing. This is different from “active under contract” which means that there is still a lot that needs to be done to complete the home sale, and you still might have a chance at getting in an offer. As a buyer, if you see a property listed as “pending,” it’s best to keep on scrolling to the next house.

FAQ

Hopefully by now you have a good understanding of what an “active under contract” property listing means. That said, some questions might remain, so let’s take a look at a few FAQs.

When do listings change from ‘active’ to ‘active under contract’?

Agents change 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 seller finding a new house.

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

The bottom line: ‘Active under contract’ means the sale isn’t final

A property listed as “active under contract” isn’t quite as available as one listed as “active,” but if you’re interested in making an offer, not all hope is lost. Talk to your real estate agent about the pros and cons, consider how much you really want the home, and make the best decision based on your specific wants and needs. Thought about it enough and ready to make an offer? Get preapproved with Rocket Mortgage® to start your home buying journey today!