The real estate world can be confusing. Frequently, buying a home (especially if you are a first-time buyer) is a stressful situation in which you can find yourself trying to make sense of important terms that you’ve never been exposed to before. While your real estate agent should be able to explain these terms to you in a way you can comprehend, it’s essential to go into a buying (or selling) situation with a good, basic understanding of keywords and phrases you’ll likely encounter. Knowing precisely what agents and brokers are talking about can help you feel more confident when making important decisions.
When you first consider viewing a home, you may come across terms such as “active under contract” or “pending.” Put simply, these phrases essentially indicate where a property is in the selling process, and thus whether or not a buyer can view or make an offer on a home.
What does active under contract mean?
To fully comprehend the term “active under contract,” it helps to start by breaking the phrase down. When we talk about the status “active” as it relates to real estate, what it really means is that a listing has been posted on a local or regional MLS (Multiple Listing Service) and is officially up for sale. At the point where a listed property is active, other agents can log in and view the property through the MLS and begin to show the home to potential buyers.
From this point, it’s relatively easy to see how a property transitions from “active” to “active under contract.”
When a buyer makes an offer that the seller accepts contractually, the status of the listing then turns to “active under contract.” At this point, the contract between buyer and seller will bar the seller from agreeing to sell the home to someone else, and also binds the buyer to their agreement to purchase the home.
However, as with most contracts, some contingencies must be met for the sale to officially close. Typically, these contingencies include fulfillments such as the buyer’s financing, home inspections, and appraisals. When these contractual agreements go unfulfilled, a sale can fall through. If this occurs, the property will remain active but no longer under contract on the MLS, allowing other buyers to swoop in and make offers on the home.
Can you make an offer on a house that is under contract?
What happens if you find your dream home, but the status of the property is listed as active under contract? Many people run into this situation, especially if the home they are interested in is highly desirable. The good news is you don’t have to give up if you fall in love with a house under contract.
While a property is active under contract, a seller cannot enter into another contractual agreement with a different buyer. However, they can receive back up offers, which allows the seller to enter into a contract with another buyer should the initial contractual contingencies go unfulfilled, and the sale falls through.
Because of this, homes that are active under contract can still be viewed by other potential buyers. No rule says you can’t view a house under contract, but often this decision is left up to the seller. Many people who are selling homes understand that sales can fail at multiple points throughout the selling process, and will continue to show a property in preparation for the chance that contractual contingencies go unfulfilled.
The seller ultimately has some control over the status of a listing on the MLS. For example, if they have received an offer and moved to the contract stage of a sale, but they wish their selling agent to continue to market the property in order to obtain back-up offers, a seller can instruct their agent to maintain the home as active under contract on the MLS. By the same token, if a seller receives an offer that they feel strongly about, they can ask their agent to change the status of the property to “pending.” At this point, even though there are contractual contingencies that still need to be fulfilled, the agent will stop marketing and showing the property to other potential buyers.
Active under contract vs. pending.
Once a contract is fulfilled, it’s good news for the buyer and the seller, and the property then moves from active under contract to “pending.” If a property on the MLS has a pending status, it means that the sale has entered the escrow period. During this time, the final stages are underway. Final paperwork is signed, and the disbursement of funds takes place.
A buyer’s agent can show their clients any home as long as the seller, and their agent agrees. If you find your dream home, you can still request to view the property, although chances are slimmer with a pending sale. Many people choose not to view a house that has a pending sale for fear of falling in love and suffering disappointment when the home sells. But life happens, and there is always a chance that a pending sale doesn’t reach the final stage.
It’s worth noting that, while a listing agent usually won’t accept offers on a house that has a pending sale, a buyer’s agent can contact the listing agent and let them know they have a client who is keen and interested in the property. This means that, if the sale does fall through, they have a heads up and can quickly write an offer before the house is put back on the MLS as active.
Remember, each circumstance is very different, and it often depends on both the buyers and the sellers. There isn’t necessarily a one-size-fits-all solution to when you can view a property or whether or not a sale will go through. It’s best to ask your agent on a case-by-case basis, as it’s their job to do the very best they can to get you the home you want. However, having a good understanding of these essential real estate terms will help you feel confident and pave the way on your path to purchasing the home of your dreams.
What is an active option contract?
Active option contract is a term that is used when the seller has accepted a buyer’s offer, but the transaction is in the negotiated “option” or inspection period. With most active option contracts, the buyer will have a few days to inspect the home and retains an option to terminate the contract. Active option contracts are similar to and may also be referred to as contingency periods or due diligence periods in various areas.