The real estate industry is full of jargon that can sometimes be confusing. One such term that you might come across is “active under contract”. But what does active under contract mean? This comprehensive guide will demystify this term for you and provide practical advice on how to navigate the real estate market when faced with this situation.
1. What does ‘Active Under Contract’ Mean
“Active under contract” is a term you’ll often see in real estate listings. It signifies that a property has received an offer from a potential buyer and the seller has accepted this offer. However, the deal isn’t sealed yet. There are usually contingencies or conditions that need to be met before the sale can be finalized. It’s a bit like being engaged to be married. The promise is there, but the marriage (or in this case, the sale) isn’t finalized yet.
2. From Active to Under Contract
A property listed as “for sale” is available and open to offers. Once an offer is received and accepted, the status changes to “active under contract”. However, this doesn’t mean the property is off the market. The current buyer must meet specific conditions – known as contingencies – before the sale can be finalized.
3. Understanding Contingencies
Contingencies are conditions that must be met for a property sale to go through. They’re like safety nets, allowing either the buyer or seller to back out of the deal if certain conditions aren’t met.
3.1. Inspection Contingency
One common contingency is the inspection contingency. Here, a buyer can hire professionals to inspect the property for any issues. If the inspection reveals significant problems that the seller is unwilling to fix, the buyer can back out of the deal without any financial penalties.
3.2. Financing Contingency
Another common contingency is the financing contingency. This condition allows the buyer to back out of the deal if they’re unable to secure financing within a specific timeframe. Even if a buyer has a pre-qualification letter from a lender, they still need to meet the lender’s requirements and get final approval for the home loan.
3.3. Appraisal Contingency
The appraisal contingency protects the buyer if the home appraisal reveals that the property’s value is less than the purchase price. In this situation, the buyer can renegotiate the price, pay the difference out of pocket, or back out of the deal.
3.4. Sale Contingency
Finally, there’s the home sale contingency. This allows buyers to back out if they’re unable to sell their current home within a certain timeframe. This prevents them from being stuck with two mortgages.
4. ‘Active Under Contract’ Vs. ‘Sale Pending’
While “active under contract” and “sale pending” might seem similar, they have different implications. “Active under contract” means that the contingencies are still being worked through, whereas “sale pending” means that all contingencies have been met, and the sale is close to being finalized. If a home is listed as “sale pending”, it’s less likely that the original deal will fall through.
5. Can a Buyer Back Out When ‘Under Contract’?
It is possible for a buyer to back out of a sale when it’s under contract. The contingencies allow for this, providing the buyer with legal ways to cancel the contract without losing their earnest money deposit or facing other penalties. However, if a buyer or seller breaches the contract without following the terms for cancellation, they could potentially face a lawsuit.
6. What are the Odds of a Contract Falling Through?
The chances of a contract falling through depend on various factors, including the specifics of the contingencies and the real estate market’s temperature. In a hot market, deals are less likely to fall through.
7. What Happens If a Contract Falls Through?
If a contract falls through due to unmet contingencies, the property usually goes back on the market. In such cases, if you had your eye on the property, you could still have a chance to buy it. It never hurts to keep such properties on your radar until the final sale goes through.
8. Should You Put in an Offer on a Property That’s ‘Under Contract’?
If you’re in love with a property that’s listed as “active under contract,” don’t lose hope. It’s worth considering putting in a backup offer. A backup offer is an offer that will be accepted if the current contract falls through. While the majority of contracts do go through, there’s always a chance it could fall through, and you could be next in line.
9. How Long Does the ‘Under Contract’ Phase Last?
The “under contract” phase typically lasts 30 to 45 days from the date the offer is accepted. This period is used to work through the contingencies. However, this timeline can vary depending on the specifics of the contract and the contingencies involved.
10. The Bottom Line: Navigating ‘Active Under Contract’
While “active under contract” might sound like the property is off-limits, it’s not necessarily the end of the road for interested buyers. Contingencies can create opportunities for backup offers, and there’s always a chance the original deal could fall through. So if you see a property listed as “active under contract,” it’s worth keeping it on your radar and perhaps even putting in a backup offer.
Understanding the intricacies of real estate terms like “active under contract” can help you navigate the property market more effectively. So don’t be discouraged by a property status that’s “active under contract”. Instead, arm yourself with knowledge, stay optimistic, and keep an open mind. After all, the real estate market is full of surprises, and your dream home might just be an unmet contingency away!
Contact Jacob Realty
Navigating the complex waters of real estate can often feel daunting, especially when faced with terms and situations you may not fully understand. That’s where Jacob Realty comes into the picture. As a seasoned real estate agency rooted in South Texas, we possess an in-depth understanding of the regional market dynamics, ensuring that both buyers and sellers are positioned to make informed decisions that serve their best interests.
Whether you’re entangled in the ‘active under contract’ phase, considering placing a backup offer or embarking on a different real estate journey altogether, our team of dedicated and knowledgeable agents is here to guide you every step of the way. Our goal is to demystify the real estate process, making it a less stressful and more enjoyable experience for you.
With Jacob Realty, you’re not just getting a real estate agent. You’re gaining a partner committed to supporting you in finding the perfect home or selling your property at the right price. Our intimate knowledge of South Texas, coupled with a personalized approach to service, ensures that your real estate endeavors are met with success.
Ready to make a move in the South Texas real estate market? Contact Jacob Realty today. Our doors are always open to discuss your real estate needs and provide you with the insights necessary to make savvy decisions on the road to achieving your property dreams.