During a real estate transaction, both buyers and sellers will come across several different contingencies on the way to closing day.  Any contingency is a condition that must be met in order for the real estate contract to continue.  While most contingencies deal directly with the home for sale, a home sale contingency is a little different.  

What is a home sale contingency?

This contingency comes from the buyers and is included in their offers to purchase homes.  It states that in order for the buyers to be able to purchase the home, they must first sell their current house. The sellers must agree to this contingency if they want to accept the buyer’s offer.

Why would a buyer write a home sale contingency?

Buyers write offers with home sale contingencies when they need the profit from their home sales in order to purchase a new home.  The buyers’ mortgage lenders may not qualify them to carry two mortgages.  Often, in these cases, the buyer’s debt to income ratio is too high.

What is in a home sale contingency?

In a home sale contingency, the buyers will ask for a specific number of days to sell the current home.  If the seller agrees, the home will go under contract while the buyers work to sell the current home. The amount of time the buyers request may be different from area to area because home markets are different. For example, a buyer selling near D.C. may only ask for fifteen days to sell the current home, but a buyer with a home to sell near Culpeper may need thirty days.

Why would a seller accept an offer with a home sale contingency?

Sellers who accept home sale contingencies are taking on a risk.  They take their homes off the market and are willing to hold it while the buyer sells a current home.  In these situations, sellers are risking time and money.  If the buyers are unable to sell their current home in the allotted time frame, the contract can be voided.

However, if a seller has a unique home or is located in an area experiencing a slower market, accepting an offer with a home sale contingency is more appealing.  Oftentimes sellers in a fast paced market do not like to accept offers with home sale contingencies.

What if I get another offer for my home?

If sellers get another offer for their home during the home sale contingency, they can use a kick out clause (if it has been included into the contract) to void the first contract.  In order to do this, the sellers must provide notice to the buyers that they have received another offer.  The buyers have a set amount of time (usually seventy two hours) to either move forward with the purchase or exit the contract.

I need a home sale contingency in order to purchase a new home.  How can I make my offer better for a buyer?

While accepting an offer with a home sale contingency can be risky for a seller, there are some things you can do as a buyer to help the seller feel more confident in accepting your offer.

Buyers can:

  • Put down a larger earnest money deposit
  • Make an offer that reflects the seller’s risk – Giving an offer that is less than full asking price with home sale contingency is not ideal
  • Be flexible  Be willing to work with the seller on closing dates and home inspection items
  • Share market info about your current home  Have your REALTOR® share information about the current market conditions, average days on the market for homes in the area, and comparable homes to the seller’s agent.  
  • Price your current home to sell  It’s important to show your motivation to the sellers by pricing your home to sell.  This demonstrates that you are serious about moving.

Buying or selling a home with a home sale contingency has more moving parts, but it is definitely a reachable goal. The key to succeeding is working with an experienced REALTOR® who can clearly communicate and negotiate.