What is Active Under Contract in Texas?

If you’re browsing Texas real estate listings, you might come across a property marked “active under contract.” Then, you might wonder, “what is active under contract?” Does it mean the home is still available, or is it off the market? The answer lies somewhere in between. Let’s get into it.

Main Takeaways

When a home is labeled Active Under Contract, the seller has accepted an offer, but the deal isn’t final yet. They still need to meet some conditions, like inspections or financing approvals, before they can close on the property. During this time, the property remains visible to other buyers, and in some cases, the seller may accept backup offers. 

What Is Active Under Contract? 

As experts in property services of Austin, we can tell you that active under contract is a real estate term indicating that a seller has accepted an offer, but the sale is still in progress and not yet finalized. This status falls between offer acceptance and the closing process. It usually lasts 30-60 days, although certain factors can impact the length. 

Unlike a pending status, “active under contract” keeps the listing open in case the initial deal falls through. This way, sellers can avoid relisting delays and give other buyers a chance to submit a backup offer.  

The term “active under contract” is not officially defined by the Texas Real Estate Commission (TREC). That said, sellers may use similar statuses to describe properties they have under contract, but are still accepting backup offers for:

• Active Option Contract: This status means the seller has accepted an offer, and the property is under contract during the option period. During this time, the buyer can terminate the contract for any reason. So, the property stays active in the Multiple Listing Service (MLS) and the seller can keep showing it to prospective buyers and taking in offers. 
• Active Contingent: This status indicates the property is under contract, but there are certain contingencies the buyer must meet before they can move forward with the sale. Due to that, the property is still available for showings and backup offers during this period. 

What Happens When a Property Is “Active Under Contract”

When a property is marked “Active Under Contract,” the seller has accepted an offer, but the deal isn’t final. The buyer still has to complete numerous steps before they can close on the property. So, during this time, the property often stays on the market in case the initial offer falls through. 

Getting more in depth, the buyer must work through any contingencies the contract outlines, like the home inspection, appraisal, and financing approval process. If the buyer meets these conditions by their deadline, the sale moves forward. However, if they encounter issues, like a failed inspection or being denied financing, the seller may renegotiate the contract or even cancel it. 

Because the sale isn’t guaranteed, sellers may continue showings and accept backup offers. This may happen especially often in popular places, like Austin, TX’s more up-and-coming areas. Then, buyers who missed out on the initial deal can submit a backup offer. The seller can use that backup offer if the first contract falls through. This gives buyers a chance to get in line for the property, so to speak, without committing unless it becomes available. Also, it helps sellers keep their options open while giving the first buyer a fair chance to complete the purchase. 

Pros and Cons of Buying a Home That Is “Active Under Contract”  

If you’re interested in a home marked “Active Under Contract,” you might wonder whether pursuing it is worth your time. Although it’s not quite as straightforward as making an offer on a regular, active listing, this status still comes with its advantages and drawbacks. 

Pros 

• Chance to Get a Prime Property Before It Goes Away – If the current deal falls through, you could be next in line without competing against a flood of new buyers. Being prepared with a backup offer means you’re ready to act fast, which can be a huge advantage. Your proactive approach can help you snag a great property in the nick of time.
• Less Competition – Many buyers overlook properties that are in limbo, so this gives you the chance to swoop in on an under-the-radar find. With fewer people vying for the same home, you may experience less pressure and avoid bidding wars. This can make you be more strategic and thoughtful decision-making process.
• Possible Negotiation Leverage – If the initial buyer backs out, the seller may be more willing to negotiate on price or terms rather than have to start the process all over again. After all, it would be a hassle to have to relist the property and find new buyers. Thanks to this, you could end up with a more favorable deal than you might have if you sought out the property from the start.

Cons 

• No Guarantee the Deal Falls Through – If the original buyer meets their contingencies, your backup offer won’t matter. Even if you’re prepared as a backup, you might never get the opportunity to step in. This uncertainty can leave you feeling powerless and unable to influence the outcome.
• Uncertain Timeline – You might wait weeks, only to find out the deal closed with the original buyer. It can be stressful to stand by idly, since you’re left without a clear sense of how you should move forward. This can complicate your planning, especially if you’re on a tight schedule to find a new property.
• Emotional Investment – Waiting for a deal to collapse can be frustrating, especially when you’ve already factored the property into your investment strategy. It can be mentally taxing to imagine potential profits or plan renovations on a deal that may never materialize. So, it’s essential to maintain a level-headed approach and keep other opportunities in mind.

What Should Sellers and Buyers Know About “Active Under Contract” Homes? 

Both buyers and sellers need to understand how the “active under contract” status impacts their real estate transaction. Whether you’re making an offer or selling a home, knowing what to expect can help you make better decisions. 

For Sellers 

Even with an accepted offer, sellers can still entertain backup offers in case the deal falls through. This gives them a safety net if the initial buyer struggles with financing or other contingencies. If they hit unexpected roadblocks, your plans could fall through in the blink of an eye. Having a backup offer in place can prevent you from having to start the selling process all over again from scratch. 

Some sellers who keep a property “active under contract” still show the property to maintain buyer interest, while others pause their marketing efforts. If you allow showings, be upfront with potential buyers about the home’s status and only accept strong backup offers. Prioritize buyers with solid financing and fewer contingencies to reduce the risk of another failed contract. 

For Buyers 

If you’re investing in a property marked as “active under contract,” submitting a strong backup offer could give you a chance to get it if the first deal falls apart. If your backup offer has fewer contingencies and flexible terms, that could get your foot in the door. 

To stand out, offer favorable terms such as a quick closing period or fewer contingencies. Express genuine interest in the property while remaining prepared to move on if the primary deal closes successfully. 

Additionally, there’s no guarantee the initial deal will fall through, so keep exploring other options instead of waiting indefinitely. 

Lastly, knowing the key deadlines in the seller’s contract (such as financing approval and inspection periods) can help you gauge when the home might become available again. This can help you plan your next steps effectively. 

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