What Does Active Under Contract Mean? A Guide for Home Buyers

For home buyers, seeing a desired property listed as "Active Under Contract" can be confusing. In short, an "Active Under Contract" status means the seller has accepted an offer from a buyer, but the sale is not yet final, and the seller is typically still accepting backup offers. The deal remains contingent on certain conditions being met, and until the closing, the sale can still fall through. This guide explains how these listings work and your chances as another potential buyer.

What is the Definition of 'Active Under Contract'?

"Active Under Contract" is a Multiple Listing Service (MLS) status indicating that a seller has signed a purchase agreement with a buyer, but the property remains actively marketed. This status signals to other buyers and their agents that the seller may be willing to consider backup offers. The initial purchase contract almost always contains contingencies—conditions that must be fulfilled for the sale to proceed. Common contingencies relate to financing, home inspections, and appraisals. The property will typically remain in this status for 30 to 60 days while these contingencies are resolved.

How is 'Active Under Contract' Different from 'Pending'?

Understanding the difference between "Active Under Contract" and "Pending" is crucial for assessing your opportunity.

• Active Under Contract: The sale is in its early stages. Key contingencies have not yet been satisfied. The listing is often still open for showings, and the seller is actively seeking backup offers as an insurance policy.
• Pending Sale: The property has moved past the initial contract stage. All major contingencies have been met (e.g., financing is secured, the inspection is complete). The sale is now primarily awaiting final steps like the title search, final walk-through, and closing. Listings with a "Pending" status are usually no longer shown to other buyers.

The following table outlines the key distinctions:

Why Would a Home Sale Fall Through?

A home sale can fall apart for several reasons, which is why the "Active Under Contract" status exists. Based on industry assessments, issues with a buyer's financing are among the most common reasons for a deal to collapse. Specifically, a sale may fall through if:

• Financing Contingency: The buyer's loan application is denied, and they cannot secure a mortgage.
• Appraisal Contingency: The property's appraised value comes in lower than the agreed-upon purchase price, and the parties cannot renegotiate.
• Inspection Contingency: The home inspection reveals significant, unexpected damage (e.g., foundation issues, outdated wiring), and the buyer and seller cannot agree on repairs or a price reduction.
• Home Sale Contingency: The buyer's offer was dependent on the successful sale of their current home, which did not sell in time.

Can You Make an Offer on an Active Under Contract Home?

Yes, you can and should make an offer on a home you love that is Active Under Contract. Since the deal is not finalized, your offer would be considered a backup offer. It is important to understand that the seller cannot simply break the existing contract to accept your offer, even if it is higher. However, if the current deal falls through due to an unmet contingency, your backup offer would be next in line for consideration.

To improve your chances, follow these steps:

1. Have your real estate agent contact the listing agent to confirm the seller is indeed accepting backups and to understand the specifics of the current situation.
2. Get pre-approved for a mortgage. This demonstrates you are a serious and qualified buyer, making your backup offer more attractive.
3. Make a strong, clean offer. Based on your agent's guidance, consider putting forward a competitive offer with minimal contingencies to stand out from other potential backups.

Conclusion: Key Takeaways for Buyers

Finding a home listed as Active Under Contract does not mean you have missed your chance. This status represents a strategic opportunity for motivated buyers. By understanding the process, you can position yourself to act quickly.

The most critical steps are to work closely with your real estate agent to submit a compelling backup offer and to ensure your own financing is in order with a pre-approval. While there is no guarantee the primary deal will fail, having a strong backup offer in place can be a worthwhile strategy in a competitive market.