What is an Active Option Contract

Real estate terms are many and can be confusing, especially if you are selling your home without an agent. One bit of jargon you might have come across is “active option contract,” or it’s abbreviation, AOC.

Read on for all you need to know about an active option contract, what it means for you as the seller and how the process works.

What Does Active Option Contract Mean?

If you receive an offer on your home and you accept that offer, then the buyer can ask for a time period for an inspection process to take place. The buyer will give a deposit to you the seller to essentially hold the house for them while they work through the inspection, usually by a third party home inspector. This means that your home is under active option contract, meaning you have accepted an offer on your house but the buyer has the option to back out pending the results of the home inspection.

What is the Active Option Contract Process?

If you have accepted the buyers offer then they will start by giving you an earnest money deposit, essentially holding their spot should they choose to go forward with the contract and buy your home. The earnest money is generally 1%-2% of the home purchase price.

If the buyer or seller chooses to back out of the contract, for any reason listed in the contract, then the earnest money is refundable. If either party backs out for a reason other than one listed in the contract then not only does the deal fall through, but the seller keeps the earnest money. In the case that the buyer moves forward and the sale goes through, the earnest money is put towards the sale price of the house.

A second amount of money is put down by the buyer, an option fee, which ranges from $100-$200. The option fee is non-refundable, if the buyer chooses not to buy the home the seller gets to keep the money for holding the potential buyer’s spot. If the buyer moves forward with the contract the fee typically goes towards the sale price of the home.

Keep in mind that even if the seller decides to go forward with buying the home the contract is still negotiable. If the home inspection report comes back with repairs or issues the potential buyer can negotiate for a lower selling price or ask for you to pay for repairs to the home before they buy.

Can You Still Receive Offers While Your Home is Under an Active Option Contract?

Yes, as a seller you can still accept other offers while your house is under contract. There is always the chance the potential buyer will back out so accepting other offers is a good backup plan. Remember, with an AOC your house is not officially sold, so having another buyer in line can help you sell your home faster.

What is Active Contingent vs. Active Option Contract?

If you’ve come across active option contract then you might be confused about what active contingent contracts are. They are very similar types of contract, with one key difference: the timing. In an Active Contingent Contract the buyer has looked at the home, submitted an offer and there are some issues — or contingencies — that need to be resolved before the sale goes through.

Often times these contingencies are a home that doesn’t pass inspection, the buyer needing to sell their own home first or the buyer getting approved for the mortgage. After the contingency is taken care of the house sale can go forward, moving from Contingent status to Pending to Closing.

Why Would my Active Option Contract Fall Through?

Most homes under active option contract go through, but if they don’t work out it’s usually do to one of three reasons:

  • Buyer’s Remorse — Purchasing a home is a big decision, especially for first-time home buyers. If the buyer gets cold feet they might back out during the option process.
  • Home Inspection Problems — If the inspection comes up with problems the buyer may choose to walk away from the home rather than take on repairs. They could also negotiate you, the seller, to make the repairs first and if you don’t have the cash to fix your home before selling then the contract could fall through.
  • Finances- This is a more common reason for an active option contract to fall through. Whether the financial troubles are with the buyer or the seller or the bank, money problems can cause an AOC to fall through.

What Other Options Do I Have?

If you don’t have the capital to fix up your home, or if you need to sell quickly and don’t want to wait on possibilities like an AOC then would want to consider a house buying company so you don’t have to sell the house for a loss or keep the home on the market for longer than you’d like. Companies that purchase houses in as-is condition are used to dealing with repairs, big and small, and can give you a fair offer on your home.

If you decide to sell your home with damage, or just want to sell your home as quickly as possible, reach out to a us. We are a non-traditional buyer and your top rated, local Utah house buying company! We will buy your house in any condition, saving you the fuss of making the home repairs yourself, while trusting you’ll get an honest and stress-free cash offer on your home.