Home Sale Contingency.
Home Sale Contingency.
A home sale contingency is a powerful tool in real estate transactions, providing protection for buyers who need to sell their current home before purchasing a new one, and presenting both risks and opportunities for sellers. Here’s how it works—and what both buyers and sellers need to know.
What Is a Home Sale Contingency?
A home sale contingency is a clause in a real estate contract stating that the buyer’s purchase of a new property depends on the successful sale of their existing home by a specified date. If the buyer’s home doesn’t sell in time, the contract can be canceled without penalty, and the earnest money is typically refunded to the buyer.
How It Works for Buyers
Financial Protection: If you need the proceeds from your current home to buy your next one, a home sale contingency ensures you’re not forced to carry two mortgages or risk losing your earnest money deposit.
Negotiation Leverage: You can make an offer on your dream home without having already sold your current property, but your purchase only moves forward if your sale closes on time.
Timeline: The contingency will specify a deadline by which your home must sell. If it doesn’t, you can walk away from the contract without penalty.
How It Works for Sellers
Conditional Sale: Accepting an offer with a home sale contingency means your sale is not guaranteed until the buyer’s home sells. If their sale falls through, your deal does too, and you may need to relist your home.
Continued Marketing: Many sellers keep their listing “active” so they can consider backup offers while the contingency is in place.
Kick-Out Clause: Sellers often negotiate a “kick-out clause,” allowing them to continue showing the home and accept another offer if a better, non-contingent buyer comes along. The original buyer then has a set period (often 24-72 hours) to remove the contingency or forfeit the contract.
Pros and Cons
Key Takeaways
For Buyers: A home sale contingency gives you peace of mind and financial protection, but may make your offer less attractive in a competitive market.
For Sellers: Accepting a home sale contingency carries risk, but a kick-out clause can help protect your interests and keep your sale moving forward.
Bottom line:
A home sale contingency can be a win-win when both parties understand the risks and protections involved. Buyers should use it to safeguard their finances, while sellers should negotiate terms that minimize delays and keep their options open.
If you’re considering a home sale contingency, work closely with your real estate agent to craft a contract that meets your needs and keeps your transaction on track.
Written by Malcolm Davis of Homevets Realty LLC.
📞 Contact me at 254-419-5073
📧 Email me at mrdavis324@outlook.com
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