What the Heck is 'Active Under Contract?'

By Dave Fratello | January 12th, 2017

One of the more confusing changes recently to local online real estate is a new term: "Active Under Contract."

Properties can display in any of four official statuses. The first 3 are easy enough:

• "Sold" and "Active" are self-explanatory.

• "Pending" is a term that might take some getting used to, but it's an oldie. By now you know that means "it's in escrow, it's not available, it's probably going to close, so move on to the next one."

Then, for some number of years, there was a fourth term for a fourth status: "Back-Up" or "Backup Offer." (Before that, "Contingent.")

The idea was to say to potential buyers, "We've accepted an offer, but we're not so sure about these folks, and we'd welcome a backup offer from you instead."

The thing is, buyers seemed never to be too hot to trot for properties that were already in escrow. Why spend your time looking at, writing an offer on and negotiating for a property that already has an accepted offer?

In certain circumstances, this is exactly what you should be doing! But it's easy to see why it does not appear to be worth the effort.

So it turns out, "Backup Offer" didn't work very well to convey to potential buyers, "Come see this house! Write us an offer! Maybe maybe! Hope springs eternal!"

And thus was the replacement, "Active Under Contract," born.*

Truthfully, the phrase is clunky and almost seems to be self-contradicting.

Is the house "actively" for sale?

Or is it "under contract?"

Both?!? Maybe!?!?

This is supposed to be better than "contingent" and "backup offer?"

Interestingly, every real estate website is treating this recent change a little bit differently. First, here's how they display the status names:

Redfin:

"Accepting Backup Offers" appears in a big banner.

Up at the top, though, the technical status listing also says "Active Under Contract."

Zillow:

"This home has a pending offer." Later, below, it states "PENDING" for the status. Zillow is linked to the MLS, but they're not using the terminology at all.

Realtor.com: "For Sale - Active Under Contract."

MBC: "Active Under Contract."

Meantime, if you are getting MLS listings emailed to you from your agent (or a would-be suitor), you've begun to see the new status "U" replacing the old status "B," which had been for backup offer.

There is a bit of a cost to the seller from going with "Active Under Contract." In this case, DOM continue to be accrued. They don't when a property is "Pending." If you do come back to market after a failed deal, you'll suffer a greater DOM penalty when switching to simple, pure "Active" again.

More interesting, perhaps, is the subject of where these "Active Under Contract" properties display.

Are they mixed in with active listings, or not?

Out of the 4 sites listed above, MB Confidential included, only realtor.com lists "Active Under Contract" properties along with the simply "Active" listings.

This practice by realtor.com is one reason they show 92 homes for sale in MB today, when the inventory of "Active" listings is actually 73. And they want you to think of that site as one of the most accurate!  

Looking at some local competitors, we see a mix, no uniformity at all. Some agent websites show "Active Under Contract" listings as if they were simply "Active," perhaps in an effort to lure you into a discussion about that property. The discussion is meant to end roughly this way: "Sorry, that's not available now, but I have some others to show you." Meh.

Meantime, Redfin, Zillow and MBC will all display an "Active Under Contract" home, but you have to know how to find it on each site. (Easiest would be searching by address, or clicking on a link from a past email update, for example.) 

At MBC, we mix in "Active Under Contract" properties with lists of "Pending" listings because they are both in a similar status.

We report new escrows in the Ticker and on the MB Dashboard as they happen. From the Dashboard or "NOW" menu, you can see all of the recently pending sales together like this:

We don't list these with the "Active" listings because we fancy our readers and clients here to be savvy folks. You don't need to be misled. You can tell the difference between "Pending" and "Active Under Contract," and you can decide whether to pursue one that's in the shakier status, or not.

On a case by case basis, some "Active Under Contract" listings might be properties that you'd want to inquire about further.

Just why, you would ask (your agent would ask), are they stuck in this particular status? Might an offer from us be better than the offer they have already? What would it take?

Those are the right questions. You never know.

(As we finish this post today, we're involved in a side text discussion about a pending sale we've got going on a listing [off-market], and the agent for some other potential buyers is asking all the right questions about whether that agent's buyers might be able to present a more compelling offer than the one that our sellers have already accepted. See, that's someone doing their job. People say realtors don't work for a living.)

Whether or not "Active Under Contract" is an improvement, it's here to stay. 

Way up above we posted a little asterisk* as to why this new terminology came into being.

It wasn't just to try a fancy rephrasing of "Backup Offer" to something more misleading enticing.

* The change is also related to efforts to create uniform database language among multiple MLS platforms to enable them to communicate with one another better.

For that reason, we're probably stuck with it.

Now, if someone wants to suggest some additional statuses, let's just say "no, this is quite confusing enough, thank you."

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