Active Under Contract | 5 Important Facts

Active Under Contract | 5 Important Facts

Active Under Contract

If you’ve browsed real estate listings lately, you may have seen the status active under contract on some home listings. This term can generate a lot of questions for buyers and sellers alike. Active under contract means that a seller has accepted an offer to purchase their home. However, the buyer will have a  contingency period to investigate the condition of the property.

What Does Active Under Contract Mean?

When a home is listed for sale, it is listed on the MLS (multiple listing service) in an active status. That means that potential buyers can come to view the property and decide whether or not they are planning on making an offer. When a buyer makes an offer on the property, the listing agent will change the status of the listing to active under contract. During this time, the buyer can research all factors of the property to determine if they plan to go through with the purchase.

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While a property is listed as under contract, the seller and buyer are working towards completing the necessary steps to close escrow. These steps may include inspections, appraisals, financing arrangements, and other contingencies specified in the contract. If the buyer is not satisfied with what was determined during the contingency period, then theyactive under contract can cancel the purchase and the home goes back on the market. This status informs potential buyers an offer has been accepted.

When a property is under contract, then the buyer will perform their  due diligence on the property. This will provide valuable information to the buyer so they can decide if they want to proceed with the purchase..

When a real estate listing displays the status active under contract, it means the sellers of that home currently have an accepted seller’s purchase and sales agreement with buyers. There is a pending sale, that is subject to closing escrow.

However, the home is still being marketed and shown during this contingent period. This keeps options open in case the current buyer needs to back out for any reason before closing. It allows the sellers to find alternate buyers if necessary more easily.

Why Would A Home Be Active Under Contract?

A home is under contract means that the seller has accepted a purchase agreement.  During the active under contract property phase, the buyer and seller navigate through the contingencies specified in the purchase agreement. These may include inspections, an appraisal contingency, and other conditions that need to be satisfied before the sale can proceed. This period allows the buyer to thoroughly assess the property’s condition and ensures that the transaction aligns with their expectations.

Secondly, financing plays a pivotal role in real estate transactions. The house active under contract status indicates that active under contractthe buyer is in the process of securing the necessary funds to complete the purchase. It’s a crucial time for the buyer to finalize their mortgage approval and for the lender to conduct any additional due diligence.

Additionally, unexpected hurdles or issues may arise during this phase, such as title concerns or problems discovered during inspections. The status provides a transparent signal to the market that the property is in a transitional state, and potential buyers are informed that the property is not readily available for new offers.

An under-contract property part of the real estate process allows for a comprehensive evaluation of the property,  This ensures that the buyers are knowledgeable of the house they are buying.

The Challenges of Buying a Home Under Contract

Purchasing a home that is under contract presents unique challenges for potential buyers. The property is under contract as the sellers accepted an offer.  Any offer made on the property would be considered a backup offer. No money is deposited as the seller is under contract with a buyer.

active under contractOne primary challenge is the potential for a competing backup offer. Despite the property being under contract, unforeseen circumstances could lead to the deal falling out of escrow. In such cases, the seller may entertain backup offers, leaving the current buyer at risk of losing the home to a higher or more favorable bid. Buyers must navigate this delicate situation with careful consideration of their offer’s competitiveness.

The timeline is another important consideration. The under contract phase involves completing buyer contingencies and requirements specified in the purchase agreement, such as seller disclosures, a home inspection contingency, home appraisals, and lender considerations. Delays in any of these home buyer contingencies can impact the closing date, causing uncertainty.

When a home is under contract, the property remains off the market but is not yet off-limits to other buyers. The buyer in first position invests time and money into inspections to perform their due diligence.  In summary, while active under contract homes offer potential buyers an opportunity to secure a property in back up status. Be sure to ask real estate questions about the meaning of the different listing statuses.

When Does the Status Change From Active Status?

The shift from active status in real estate occurs when a seller accepts an offer on the property. Escrow is opened and the buyer deposits the earnest money deposit. At that time, there are still contingencies on the property for a buyer to complete.

Once the contingencies have been removed, the status will be changed to pending. This means that the buyer has completed all the investigation of the property and is satisfied these include inspection, appraisal, review of the disclosures and a loan contingency.  Agreed upon home inspection repairs have been completed by the seller by the time that escrow closes.

The status changes to sold once escrow has closed and the property has been conveyed to the buyer.

Final Thoughts

When a property is under contract, the seller can take backup offers. It is important for the listing agent to not disclose any details of the first offer.

About the Author

The blog post “Active Under Contract | 5 Important Facts ” was written by Sharon Paxson, a top Newport Beach Real Estate Agent. With experience since 2005, representing buyers, sellers, landlords, and tenants, we welcome the opportunity to share our expertise with you and guide you through your real estate transaction.

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Sharon Paxson is a full-time REALTOR® with EQTY | Forbes Global Properties and has been specializing in residential real estate throughout the Newport Beach area since 2005 assisting Buyer’s, Seller’s, Landlords, and Tenants with their real estate needs.

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