When delving into real estate transactions, you might come across two terms that often cause confusion: "Active Under Contract" and "Contingent". Both statuses indicate that a property is not available for purchase, but they differ in the stage of the sales process they represent. Let's dive into these terms to understand their nuances and how they impact your home buying or selling journey.
Before we delve into the differences, it's crucial to understand that real estate statuses are not universally standardized. While the terms "Active" and "Under Contract" are widely used, their meanings can vary slightly depending on the region or the real estate agent. However, we'll focus on the most common interpretations.
Understanding "Active Under Contract"
When a property is listed as "Active Under Contract", it means that the seller has accepted an offer from a buyer, but the transaction is not yet complete. The property is still considered "active" because the deal is not yet finalized, and there's a chance that the sale could fall through.
During this period, the property is typically taken off the market, and the seller will not entertain any new offers. However, the deal is not yet closed, and certain conditions must be met before the property can officially change hands. These conditions, known as contingencies, are what we'll discuss next.
Contingencies in "Active Under Contract"
Contingencies are clauses in the purchase agreement that must be satisfied before the sale can proceed. They protect both the buyer and the seller, ensuring that the deal only goes through if certain conditions are met. Common contingencies include:
- Financing contingency: The buyer must secure financing for the property within a specified timeframe.
- Inspection contingency: The buyer has the right to inspect the property and negotiate repairs if necessary.
- Appraisal contingency: The property must appraise at or above the agreed-upon price.
If any of these contingencies are not met, the buyer can walk away from the deal without losing their earnest money. However, if the contingencies are satisfied, the sale will proceed to the closing stage.
What happens when contingencies are met?
Once all contingencies have been satisfied, the property moves to the "Pending" status, indicating that the sale is likely to go through. However, there's still a chance that something could go wrong, such as a problem with the title or a change of heart by either party.
During this period, the property is usually still considered "active" in the Multiple Listing Service (MLS), but it's not actively marketed to new buyers. If you're interested in a property that's "Active Under Contract", it's essential to understand that you'll be competing with the existing buyer, and the seller may not be open to new offers.
Understanding "Contingent"
When a property is listed as "Contingent", it means that the seller has accepted an offer from a buyer, but the sale is still subject to certain conditions. Unlike "Active Under Contract", a "Contingent" listing typically remains active in the MLS, indicating that the seller is still open to receiving backup offers.
In some cases, a "Contingent" listing may be subject to a contingency that allows the seller to continue marketing the property to new buyers. For example, the current offer may be contingent upon the buyer selling their existing home. In this case, the seller might accept backup offers, with the understanding that the sale will only go through if the primary buyer's contingency is met.
Backup offers and "Contingent" listings
If you're interested in a property that's listed as "Contingent", you can submit a backup offer. If the primary buyer's contingency is not met, or they decide to walk away from the deal, the seller will consider your backup offer. However, it's essential to understand that your offer is not guaranteed to be accepted, and you may still face competition from other backup offers.
In some cases, a "Contingent" listing may indicate that the seller is using the property as a backup in case their primary transaction falls through. For example, if a seller is buying a new home but hasn't closed on the sale of their current property, they might list it as "Contingent" to ensure they have a backup plan if their primary transaction doesn't go through.
Understanding the difference between "Active Under Contract" and "Contingent" is crucial for buyers and sellers alike. As a buyer, knowing the status of a property can help you make informed decisions about whether to submit an offer or move on to other listings. As a seller, understanding these statuses can help you navigate the complex world of real estate transactions and ensure that you're protecting your interests throughout the process.
In the dynamic world of real estate, it's essential to stay informed and work closely with your real estate agent to ensure that you're making the best decisions for your unique situation. Whether you're buying or selling a home, understanding the nuances of real estate statuses can help you navigate the process with confidence and achieve your goals.