“Active Under Contract” is a real estate term that describes the status of real property (single-family home, condo, townhome, etc.) that has been listed for sale and where a seller has accepted an offer from a buyer but the deal has not yet closed. This phrase is most commonly heard in the state of California. When a property is listed on Multiple Listing Services (MLS), its status is set to “Active,” and it is then modified to “Active Under Contract” when an offer is accepted until the deal closes or is canceled. The status switches to “Sold” after the transaction is completed. In this post, we will learn what active under contract means in real estate and the difference between pending and active under contract.
What Does Active Under Contract Mean In Real Estate?
The term “active under contract” refers to the status of a property in the real estate market. Active under contract in real estate means that the buyer and seller have engaged in a contract, but there are still a few contingencies that must be completed before the deal is finalized.
To put it another way, this contractual offer removes the property from the market and precludes the seller from entering into another contract for the same property with another buyer while the present buyer proceeds through the closing process.
However, all real estate contracts typically include contingencies that must be met before the sale can be finalized. When looking at homes for sale in Desert Shores (or elsewhere), if these requirements aren’t met, there may be a chance that the contract may fall through, leaving the door open for other buyers.
House inspections, home appraisals, and the buyer’s general ability to pay for the home are typical contingencies included in a real estate contract. These complications frequently lengthen the closing process for both parties to see them through.
Making an Offer on a House Active Under Contract
If you want to make a backup offer on a house that is active under contract, you can do so. Sellers are prohibited from entering into another contract with a different buyer during the contingency period. Sellers, on the other hand, can collect backup bids from other interested parties, which act as placeholders for the next purchasers in line.
Can you Tour Properties that are Active Under Contract?
Yes, as long as the seller and their agency agree, a buyer’s representative can show their clients any home. If you find your dream home, you can still request a view, though the chances are lesser with a pending sale. Many people avoid viewing a pending sale home for fear of falling in love and being disappointed when the home sells. However, life happens, and there is always the possibility that a pending sale will not be completed.
While a listing agent would normally not take offers on a pending sale, a buyer’s agent can contact the listing agent and let them know they have a client who is enthusiastic and interested in the property. This implies that if the transaction falls through, they will be notified and will have time to write an offer before the house is relisted on the MLS as active.
Remember that each situation is unique, and it frequently depends on both the buyers and the sellers. There is no one-size-fits-all solution to when you can visit a property or whether a deal will go through. It’s preferable to ask your agent on an individual basis, as it’s their responsibility to do all necessary to get you the home you desire. However, learning these key real estate terms can make you feel more confident and will pave the way for you to buy the home of your dreams.
Can you Make an Offer on a House that is Under Contract?
Yes, you can make an offer on a house that is active under contract, but it will be regarded as a backup offer. This enables the seller to enter into a contract with a different buyer if the initial contractual contingencies are not met and the sale falls through.
As a result, active under contract homes can still be viewed by other potential buyers. No rule states you can’t view a house that is under contract, although this decision is left up to the seller. Many people who sell homes recognize that deals might fail at several points throughout the selling process and will continue to show a property in case contractual requirements are not met.
The seller ultimately has some say over the status of an MLS listing. For example, if a seller has accepted an offer and proceeded to the contract stage of a transaction, but they want their selling agent to continue marketing the property to attract backup offers, they can tell their agents to keep the home listed on the MLS as active under contract.
Similarly, if a seller receives an offer they are enthusiastic about, they can ask their agent to modify the status of the property to “pending.” Even if there are still contractual contingencies to be met, the realtor will stop marketing and showing the property to other possible buyers at this point.
What Does Active Under Contract Mean
Active under contract means that the buyer has accepted the seller’s offer, but the transaction is still in its early stages and has yet to close. When you see a home listed as active under contract, it usually signifies that some conditions must be completed before the transaction can be finalized.
Typically, the contingencies on an active under contract house are related to the buyer securing finance, home inspections, and assessments. A sale can fall through if these contractual terms are not met. If this happens, the property will remain active but no longer be under contract on the MLS, allowing other bidders to swoop in and make an offer.
Difference Between Pending And Active Under Contract
In the home buying process, “active under contract” and “pending” are two similar statuses. Although the concepts of “active under contract” and “pending” are similar, there is a significant difference between them. Both imply that the seller has accepted the buyer’s offer. The two terms also mean that both the seller and the buyer are bound by a contract.
The primary difference is that although active under contract indicates that there are still some outstanding contingencies that must be addressed, pending status usually indicates that the sale is about to close.
Contingencies When a House is Under Contract
A buyer will include real estate contingencies in the agreement to protect themselves legally and financially, as the sale will not be completed until the contract is signed.
This can lengthen the process and allow the buyer to address a few outstanding difficulties, such as:
- Home inspections: performed to look for costly hidden building issues or environmental risks in the home. Other inspections may be performed, such as a property survey, radon, mold, and septic testing if no public sewer is accessible. If something severe is discovered, the sale may be canceled.
- Financing: Allowing the buyer to acquire a mortgage before the home transaction is completed. If the lender refuses to fund the loan, the sale is canceled.
- Home Sale: This contingency allows buyers to back out of the deal if they can’t find a buyer for their current home.
- Appraisal: A successful valuation is required for this contingency. The worth must be less than the purchase price. If it is less, the buyer can negotiate a cheaper price, cancel the contract, or make up the difference with a higher down payment. Here are some important facts concerning real estate valuations.
Appraisal issues are not widespread in real estate areas where home prices are rapidly growing. The appraiser’s data may not always be up to date with the actual market.
Sometimes an appraiser will make a mistake, causing the valuation to be lower than it should be. Every circumstance is unique, so whether you are buying or selling, you must assess the situation and make an informed decision.
What is the Significance of “Active Under Contract”?
Including stipulations in the offer is one way to protect the buyer’s interests. When buyers make an offer with contingencies, sellers must meet and/or address specific property conditions before the deal is consummated.
This gives buyers the option to back out of the deal without penalty. However, if the buyer withdraws for reasons not specified in the contract. The buyer faces a financial penalty. Normally, it takes several weeks for all of the prerequisites to be met.
What is the difference between pending and active under contract?
When a property is labeled as “active under contract,” it means that certain conditions/contingencies must be completed before the transaction may close. When a property is labeled as “pending,” it means that all contingencies have been met and the deal is nearing completion.
Is active under contract the same as contingent?
This real estate phrase is synonymous with “contingent.” A real estate listing that is active under contract has a potential buyer, but contingencies are in place.
Can a seller accept another offer while under contract?
Not until the contract is signed by both parties—even after counteroffers have been sent out—can all new offers be considered and accepted. And the laws differ from one state to the other. However, once both parties have signed it, the seller is pretty much committed to the transaction.
Is under contract better than pending?
Not at all! For a home to be listed as “pending,” that means the home is active under contract and there are no longer any contingencies on the sale. A property that is labeled as “pending” is significantly closer to being sold than one that is under contract.
What comes first under contract or pending?
When a property is marked as “pending,” it signifies it is under contract and all contingencies have been met. A contingency is a requirement that must be met before the sale may proceed. The property is considered pending once all of the contingencies have been met.
How often do active options contracts fall through?
Active open contracts do not fail very often: they fail little more than 3% of the time. This means that almost 95% of house contracts close.
Why would a house go from pending to active?
If the loan is refused owing to a buyer’s impulsive financing, the pending sale will revert to active status. It’s also conceivable that buyers are unaware of any liens or judgments filed against them.
What does active under contract no kick out mean?
When a seller wants to reserve the option to accept a better offer after the property is under contract, a “kick-out” clause is occasionally employed. A “no kick-out” clause states that once the seller’s home is under contract, he or she waives this option.
Conclusion
Being emotionally immersed in a home that is active under contract isn’t the worst thing that can happen, and if you’re a risk-taker, you’ll understand that it might not work out.
But consider what the phrase “active under contract” in real estate means. The seller has previously accepted an offer and is awaiting the fulfillment of the stipulations. The truth is that they will almost certainly be met, and the property will be sold.
It might be difficult to deal with when you find yourself in this scenario. Set a weekly goal of inspecting five homes in the adjacent suburbs to distract yourself from worrying about it. This is a useful diversion that may lead to you finding an even better home.
Frequently Asked Questions
Why is a house pending for so long?
There are numerous banal reasons why a pending offer can remain in limbo for months on end. Inspections, a delay in the survey or assessment, and even homeowner insurance are examples of these. Here are a few more things to be aware of.
Does pending mean sold?
In real estate, a “pending sale” simply implies that the seller has received and accepted an offer on their home. However, the transaction is not yet complete, so “pending” instead of “sold.” If you’re interested in a pending property, your agent should communicate with the seller’s agent to discover more about its status.
Can you outbid a pending offer?
You can no longer outbid another buyer for a pending home. Unless the deal falls through, which is unlikely but not impossible, your opportunity to purchase the home has most certainly passed. When a home sale is pending, it signifies that the sellers have accepted a buyer’s offer.
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