The term “Under Active Contract” is a status used within the Multiple Listing Service (MLS) to inform potential buyers that the seller has accepted an offer on the home. This status indicates that a legally binding purchase agreement is now in place, and the transaction has begun moving through the necessary steps toward a final closing. The designation informs the broader market that while the property is technically spoken for, the deal is not yet finalized, and the seller may still be entertaining additional interest.
Defining “Under Active Contract”
The status “Under Active Contract” signifies that a formal offer has been presented by a buyer and accepted by the seller, making the contract legally enforceable. The “active” component refers to the period during which the buyer and seller are working to satisfy predefined conditions of the sale, commonly known as contingencies. These contingencies must be met before the sale can be completed. The status confirms the seller has committed to the present buyer but also suggests that the seller may still be willing to allow property showings and accept backup offers. The duration of this status is determined by the timeline set forth in the purchase agreement for completing due diligence and securing final financing.
How This Status Differs from Other Listings
The various listing statuses in real estate are designed to provide transparency about a property’s availability and the stage of its sale progression. While “Under Active Contract” denotes a property with an accepted offer still subject to conditions, other statuses reflect different levels of commitment and risk. The terminology can vary slightly between different MLS systems, but the underlying concepts remain consistent.
Active Listings
An “Active” listing indicates that a property is fully available for sale, showings, and offers. The seller has not yet accepted any offer, meaning the home is on the open market and accessible to all prospective buyers. This status represents the period of highest competition, where buyers are vying to submit the most attractive terms to the seller. Unlike a property “Under Active Contract,” an active listing has no formal commitment or legal agreement in place.
Pending Listings
The “Pending” status signals a transaction that is much closer to closing than one that is “Under Active Contract.” By the time a listing is marked pending, nearly all contractual contingencies, such as inspection, appraisal, and financing approval, have been satisfied or waived. At this stage, the risk of the deal collapsing is lower, and the transaction is primarily waiting for the final closing documents. Sellers with a pending listing typically stop all showings and cease accepting backup offers, reflecting confidence in the impending final sale.
Contingent Listings
In some MLS regions, the term “Contingent” is used interchangeably with “Under Active Contract,” signifying an accepted offer that is still subject to conditions. When the terms are distinct, “Contingent” often implies a specific, non-standard condition that must be met for the sale to proceed. A common example is a “sale of buyer’s home” contingency, where the buyer must successfully close on their current residence. While both contingent and under active contract properties have conditions, the contingent status often highlights a condition that carries a higher risk than standard inspection or financing clauses.
Key Milestones During the Contract Period
The period a property is listed as “Under Active Contract” is defined by a series of time-sensitive milestones that dictate the pace of the transaction. Following the acceptance of the offer, the buyer typically submits an earnest money deposit to an escrow agent within a few days of the contract’s execution. The first major milestone is the expiration of the inspection contingency, often scheduled within 7 to 15 days, allowing the buyer to conduct professional inspections and request adjustments. Following inspection, the focus shifts to lender requirements, including the appraisal contingency and the financing contingency. These deadlines must be meticulously tracked and met to keep the transaction on schedule toward the agreed-upon closing date, typically 30 to 45 days after the contract is signed.
Strategies for Buyers: Making a Backup Offer
For a buyer who finds a desirable property already listed as “Under Active Contract,” submitting a backup offer is the only way to officially secure the home if the primary deal fails. A backup offer is a fully executed purchase agreement that is formally accepted by the seller, but it contains a clause making it effective only upon the termination of the first contract. By securing this legal position, the backup buyer is placed next in line to purchase the property, bypassing the need for the home to be relisted. Sellers often accept backup offers as a form of insurance, ensuring a seamless transition to a new buyer without losing momentum. To make a compelling backup offer, buyers should structure the terms to be highly attractive, often by minimizing contingencies or offering a quicker closing timeline.
Common Reasons Why Contracts Fail
The “Under Active Contract” status carries the risk that the deal may not reach the closing table, often due to the failure to satisfy one of the contract’s contingencies. One frequent cause of failure is the inability for the buyer to secure financing within the specified timeline, which can happen if the buyer’s financial situation changes. Appraisal issues also commonly derail transactions when the lender’s valuation comes in below the agreed-upon purchase price. If the buyer is unwilling to cover the resulting appraisal gap, and the seller refuses to lower the price, the contract will likely terminate. Furthermore, problems discovered during the inspection period or title issues, such as undisclosed liens, can also prevent the transfer of clear title, forcing the contract to fail.