What Does an ‘Active Option’ Contract Mean?
Houses on the market typically get posted across multiple listing sites, in order to get the most traffic possible. Those listings typically include a descriptor of the home sale’s status. The status might read: active, sold, pending, accepting back-up offers, withdrawn, or expired. These labels help prospective homebuyers and real estate brokers know where the home stands in the sales process, in order to determine their next course of action.
For example, a property with an “accepting back-up offers” status tells prospective buyers that the seller may be looking for a higher offer than they currently have in hand. If a buyer sees this, they may decide to bid well over asking price, make a cash offer or be willing to provide another incentive that puts them ahead of the competition.
If the status is “active,” it means the house is still up for grabs. However, an “active” status can be further broken down into multiple subcategories, including “active option.”
Read on to discover what “active option” status means and how it works.
Different Types of ‘Active’ Statuses
There are a couple of subcategories that fall under “active” status, including:
- Active Contingent — Active Contingent means the sale is contingent upon a buyer getting approval from their lender. In this case, the house is technically still available.
- Active Option Contract — Active Option Contract means the seller accepted an offer from a buyer, but the buyer has a specified period of time during which they can back out. This window of time allows prospective buyers to schedule a property inspection and — if there is an issue — they may opt to terminate the transaction.
In some listings, you may see the terms “contingency period” or “due diligence period.” Both of these phrases can be used interchangeably with “active option contract.”
Laws for Active Option Contracts
The laws differ by state in terms of the rules for an active option contract. For example, in Texas, prospective buyers are required to pay an option fee. If they decide not to buy the house at the end of the contingency period, that option fee gets forfeited to the seller, even if the reason is stated as a contingency in the contract, according to Redfin, a real estate brokerage.
However, if the property sale moves forward, the option fee will often be applied to the final price of the property. This option fee is sometimes negotiated at the time of contract so make sure it’s spelled out what the option fee is and how it will be handled in either scenario (sale that moves forward and sale that doesn’t).
Alternative to Active Option Contract
In an active option contract, there is no guarantee that the buyer will move forward. When you’re so close to selling your property, it can be really frustrating to have the deal fall through at the last minute.
Fortunately, there’s a faster, easier way to sell your property that isn’t contingent upon a home inspection or buyer’s final decision. Take matters into your own hands by selling your property to Meridian Trust. The professional home buying company, Meridian Trust, pays cash for properties “as is” in Florida, Georgia and Alabama.
No listing your house on the market, scheduling showings or negotiating prices. Simply call us to find out how much your property is worth and receive a no-obligation cash offer over the phone. There are no commissions and we take care of all the closing costs for you.
Find out how much your house is worth by calling (954) 807-9087.
Note: This guide is for informational purposes only. Meridian Trust does not make any guarantees about the sufficiency of the content in or linked from this blog post or that it is compliant with current law. The content within this blog post is not a substitute for legal advice or legal services. You should not rely on this information for any purpose without consulting a licensed lawyer in your area.