In navigating the real estate market, terms like active, under contract, contingent, pending, and more are pop up here, there, and everywhere – but what do they mean?
What does it mean if a listing is “Active”?
In searching for houses across all the different online real estate apps and websites, most of the homes you come across will be listed as active. That means that the seller has not accepted an offer yet and the house or condo is available for purchase.
Now, that doesn’t mean that interested buyers have not submitted offers, only that the seller has not accepted one and signed a purchase agreement yet. Sellers can receive several offers, wait to review their options, and negotiate with the buyers – all while the home is listed as active. Once they accept an offer, the home is no longer considered active. It is now under contract.
Under contract doesn’t mean there is zero chance the home won’t become available again. Several factors can cause a sale to be terminated.
What does it mean when a home is “Under Contract”?
Under contract means that the seller and a buyer have signed a purchase agreement and proceeded with the next steps of transferring ownership.
Once the seller has accepted an offer, the home is no longer actively marketed, but the sale is not final yet. There are several steps to complete before closing day, but for all practical purposes, the property is no longer considered active. That agreement is a legally binding contract that includes key details of the sale like purchase price, earnest money deposits, contingencies, etc.
Can sellers still accept offers from other buyers if the property is under contract?
Essentially, no. With rare exceptions, once a home is under contract, the seller cannot accept another offer from a different buyer, even if it is a better one. Sellers can only accept another offer if the first contract is cancelled.
Can the buyer back out after going under contract?
The buyer can back out of a purchase agreement, but only under certain circumstances. A buyer can cancel their contract with the seller without major penalty if:
- A contingency has not been met
- The seller has breached the contract
- The contract allowed for termination during a specified period
Homes that are under contract are not actively marketed, but sellers may still accept backup offers in case the current sale is canceled.
How long are houses under contract?
Homes are typically under contract for 30 to 45 days. The time it takes to go from offer accepted to closing day can vary based on:
- Loan type
- Inspection negotiations
- Appraisal timing
- Title work
- Cash purchases versus financed purchases
What are “Contingencies”?
Contingencies are conditions or requirements in the purchase agreement that must be met before the sale can be officially completed. They protect both the buyer and seller in real estate transactions, and they are quite common. They often include:
1. Inspection Contingency
An inspection contingency gives the buyer time to have the condition of the home professionally evaluated. They may hire experts to check any number of the home’s features, including the roof, plumbing, electrical, HVAC systems, sewer lines, and appliances. If any issues are found, the buyer can:
- Request the seller repair it
- Ask for a credit toward closing
- Negotiate a change to the contract
- Accept the home as-is
- Terminate the contract if allowed under the agreement
2. Financing Contingency
A financing contingency is just what the name implies. It gives buyers time to apply for a loan, meet the lender’s requirements, and get final approval of the transaction. If a buyer is unable to obtain financing, despite a good-faith effort to do so, this contingency may allow them to cancel the sale without losing their earnest money.
3. Appraisal Contingency
An Appraisal Contingency protects the buyer if the home is appraised at a value that is lower than the agreed-upon purchase price. Appraisals are ordered by the lender to confirm that the home is worth the price to be paid. If the appraisal comes back lower than the purchase price, options include:
- The seller reducing the price
- The buyer paying the difference out of pocket
- The buyer and seller negotiating a different solution
- The buyer terminating the sale, if the contingency allows it
4. Home Sale Contingency
For many buyers, purchasing a new home is somewhat, or even completely, dependent on selling their current one. This contingency gives them time to list their home, accept an offer, and complete that sale so that they have access to the funds needed to purchase their new home.
What does “Pending” in real estate mean?
A listing marked as pending means that the seller has accepted an offer, a contract has been signed, and the transaction is nearing the finish line. Most, if not all, of the contingencies have been met at this point.
The final steps of the transaction take place during the pending phase. Lenders are finalizing the underwriting, and the title company is confirming there are no ownership issues or unpaid liens that could jeopardize the sale. The buyer also completes a final walkthrough to make sure the property is in the condition they expect and that all agreed-upon repairs are complete, included appliances and other items are still in place, and no damage has occurred during the process.
Pending is the final phase of the buying process, signaling that the sale is close to being completed. The likelihood of another buyer stepping in is very low.
Navigate the Market with Confidence!
The home buying journey can be daunting and confusing, but it doesn’t have to be. Don’t go through it alone. Work with a trusted agent like Ellen to feel confident and well informed every step of the way.
