The process of buying or selling a home involves navigating contract statuses tracked within the Multiple Listing Service (MLS). Encountering the status “Active Under Contract” (AUC) can cause immediate confusion for many searching for a new property. This designation indicates a home is simultaneously spoken for by one buyer yet remains visible and accessible to others. Understanding this status is important for both buyers and sellers, particularly in competitive markets where failed contracts can quickly turn into new opportunities.
Defining “Active Under Contract”
The status “Active Under Contract” signifies that a seller has formally accepted an offer from a buyer, establishing a legally binding purchase agreement. Despite this accepted offer, the listing retains its “Active” status because the transaction is not yet guaranteed to close. The contract is in a phase of due diligence, where the buyer must satisfy specific conditions before the deal can proceed to finalization. Sellers often choose to keep a property in the AUC status to continue marketing it and soliciting new offers.
Contingencies
The primary reason a property remains in the “Active Under Contract” status is the existence of one or more contractual contingencies. These are specific conditions that must be met by the buyer within a defined timeframe for the purchase agreement to remain valid. If a buyer cannot satisfy a contingency, they typically have the right to terminate the contract and retrieve their earnest money deposit without penalty.
Common Contingencies
A prevalent condition is the financing or mortgage contingency, which makes the sale dependent on the buyer securing final loan approval from a lender. The home inspection contingency grants the buyer a period, often 7 to 14 days, to conduct a thorough examination of the property’s condition. If unacceptable defects are discovered, the buyer can request repairs, negotiate a price reduction, or void the contract. The appraisal contingency protects the buyer by allowing them to walk away if the property’s appraised value is lower than the agreed-upon purchase price, as lenders will not finance more than the appraised value.
Comparing Key Listing Statuses
The “Active Under Contract” status is often confused with other common MLS terms, but each has a distinct implication for buyers. The status Pending generally represents a stage much further along in the closing process than AUC. When a listing moves to Pending, it means the buyer has satisfied or waived all major contingencies, and the transaction is moving smoothly toward the final closing date. Sellers with a Pending status usually stop accepting showings and backup offers because the likelihood of the deal failing is significantly lower.
The term Contingent is similar to AUC but is sometimes used when the seller is waiting for a single, specific condition to be met, such as the buyer selling their current home. Depending on local MLS rules and the type of contingency, a Contingent status may or may not allow for continued showings or the solicitation of backup offers. This makes an AUC listing a more viable target for an interested buyer than a property listed as Pending.
Making a Backup Offer on an AUC Property
Seeing a home listed as “Active Under Contract” should not deter a serious buyer, as this status is an open invitation to submit a backup offer. A backup offer is a legally binding contract that is executed only if the primary contract is terminated due to the failure of a contingency or any other reason. By submitting a backup offer, a buyer positions themselves as next in line to purchase the home should the primary deal collapse.
To make a backup offer compelling, a buyer should seek to minimize the risk to the seller. This often means offering a strong price, demonstrating solid financing with an approval letter, and potentially reducing or waiving some contingencies, such as a home sale contingency. If the primary contract fails, the backup offer automatically moves into the first position, and the buyer begins the standard due diligence and closing process.
What Happens When the Status Changes
The lifecycle of a property listed as Active Under Contract culminates with one of two outcomes that trigger a change in its MLS status. If the primary buyer successfully satisfies all the contractual contingencies, the seller will typically move the listing to a Pending status, indicating the final steps toward closing are underway. The transaction then proceeds to the final closing date, at which point the status is updated to Sold, marking the completion of the transfer of ownership.
The alternative outcome is the termination of the primary contract. This occurs if the buyer fails to meet one of the contingencies, such as the home appraisal coming in too low or an inspection uncovering major defects the parties cannot resolve. In this scenario, the contract is voided, and the listing typically reverts to an Active status. If the seller has accepted a valid backup offer, that buyer’s contract immediately takes the primary position, allowing the seller to seamlessly move forward.