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Active Contingent and Active CAPA Defined

June 9, 2007

Sometimes, I get calls from home buyers who are looking through the Tucson MLS and come across houses listed as Active Contingent and Active CAPA, and ask me what that means.

Active Contingent means that the Seller has already accepted an offer, but that there is still some condition, or contingency, to be met.  In most cases, the contingencies yet to be satisfied are just the standard things built into the purchase contract.  These things may include:

• The Buyer’s inspection period
• An appraisal that states the value is at least the sales price
• A round of negotiations if repairs are needed
• The Buyer’s final loan approval

Properties that are Active Contingent may come back on the market if one of these contingencies can’t be worked out between the Buyer and Seller.  If a deal is going to fall apart, it will typically happen in the negotiations for repairs.  Given that inspection periods are usually between 10 and 15 days, I would expect an Active Contingent listing to either come back on the market or change to Pending at about the 2 or 3 week mark from when the property status first changed to Active Contingent.

If you’re interested in an Active Contingent property, and it has only been Active Contingent for a couple of days, you’ve probably got another week or two to wait to see if it comes back on the market. 

As a second option, you can put in a backup offer.  If the Seller accepts your backup offer, then if the first deal falls through, you automatically step up, open escrow, and begin your inspection period.

Also - if a property was under contract and the deal falls through and the house goes back on the market, the listing agent doesn’t have to tell me what purchase price the Seller agreed to for that first offer.  In fact, a good agent should keep that information confidential.

Active CAPA is a whole different situation.  CAPA stands for “Can Accept Purchase Agreement.”  The only time this status is used is when a Seller has agreed to sell their home to a Buyer, and that Buyer must first sell their own home.

Because the deal depends on the Buyer selling their own home first, Active CAPA properties may stay CAPA for a long time.

As a Buyer under contract to buy a house when you have to sell your own home first, your position is less secure, for several reasons:

• The CAPA contract language gives specific time lines by which a Buyer must have their home under contract, and also by which they must have their sale completed.
• If a Buyer doesn’t meet those timelines, they can try to renegotiate or they must walk away from the deal, typically getting their earnest money back.
• If the Seller gets another offer, they can accept that second offer and then turn around and demand that the current Buyer either remove their home selling contingency or go away.  If the CAPA buyer can’t remove their contingency, then that CAPA Buyer has to walk away from the deal, and will usually get their earnest money back.

As someone interested in making an offer on a home that is Active CAPA, there’s a decent chance that you can kick the existing Buyer out of their position, and become the person under contract to buy that house.  However, Active CAPA isn’t a common thing in this market.

Photo via Flickr, courtesy of lars hammar

Other Information That Might Be Helpful

• Active Contingent and Active CAPA Revisited (July 17, 2008)

  Previously, I had defined Active Contingent and Active CAPA for the Tucson MLS in this post.
  There’s a small update to that.
  Because of all of the short sales in Tucson, the Tucson MLS decided in March to make the following recommendation:
  Effective immediately, the MLS Board of Directors recommends the following regarding Short Sales: Short Sales are [...]

• Preliminary Home Inspections and Research (September 11, 2008)

  I have a client considering a home that doesn’t have any covered parking.  Nice house, but the owners had a big living room built instead of a carport.  They claim that a garage or carport could be built over to one side of the house, but there’s really no guarantee of that.
  So if not being [...]

• Spuds and Other Fun Stuff (March 10, 2008)

  No SPDS No CLUE.
  Say what?
  If you’re looking to buy a home in the Tucson area, I bet you’ve seen that more than once in the listing descriptions.  So what does it mean?
  SPDS = Seller Property Disclosure Statement.  This is six pages of questions that a seller answers about their property.
  CLUE = Comprehensive Loss Underwriting Exchange [...]

• Proposed Rule Change for Short Sales in the Tucson MLS (December 20, 2008)

  Landed in my inbox today, a proposed rule change, if I understand the message correctly:
  MLS Rule Change for Short Sales
  Section 3.18- Short Sales:
  As used in these rules, short sales are defined as a transaction where title transfers; where the sale price is insufficient to pay the total of all liens and costs of sale; [...]

• Negotiating Repairs (February 16, 2009)

  Having a couple of buyers in the throes of repair requests reminds me the topic deserves a review. 
  When you buy a home in Tucson and use the customary purchase contract, you’re allowed an inspection period.  By default, you get 10 days, but I usually like to write in 15 days.  Regardless of duration, at [...]

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