What is a Home Sale Contingency?

By
Real Estate Agent with Keller Williams Realty
https://activerain.com/droplet/4gm7

A home sale contingency is a clause included in a Contract to Purchase or Purchase and Sales Agreement (documents differ by state) that a buyer submits for a house they wish to purchase.Home for Sale The clause states that the transfer of title of the sellers home, noted in the offer, is contingent on the sale of the buyers present home. 

In the Newburyport and North of Boston real estate market, sellers do not look fondly on a buyers offer if it includes a home sale contingency. With the low inventory of homes on the market for sale, and an abundance of buyers wanting to purchase homes  (a sellers market), sellers can be choosy about the offers they accept. If the seller's home is priced to market it is only a matter of time that a qualified non-contingent buyer will be found. If the buyer submitting the offer has his home on the market, especially if it is and under contract, the offer will be looked at much more favorably and may be accepted depending on the strength of the offer, and terms acceptable to the seller.  In this  case, a knowledgeable sellers agent will check the contracts on the buyers home to see if there are any contingencies in those agreements. If multiple offers are received on the home, it is less likely the seller would accept a home sale contingency. 

The seller is taking a risk when they accept an offer with a home sale contingency. A buyer needs to be aware that they will be expected to proceed with a home inspection and the signing of a purchase and sales agreement with the intent that the sale will be going forward. A second deposit is still usually required, and an appraisal ordered with cost being non-refundable. 

Why Buyers use Contingencies - Buyers submit offers with home sale contingencies because they are usually concerned that if they place their home on the market for sale without having identified a home that they are interested in their present home will sell and they will have no where to live. This can be rectified by stating in their selling contract that "the sale is subject to sellers finding suitable housing". A time frame is usually agreed upon in which a home must be identified or the contract is null and void. Once their home is under contract it is more likely that a bid for their next home will be accepted. 

It takes the skill of the real estate agents involved to help the buyer and seller negotiate terms beneficial to consummate the transaction and to co-ordinate a closing date that will work for both parties, so that they each can move out of one house and into their new one either on the same day or the next. In Massachusetts and New Hampshire, once the deed is recorded,  the home officially belongs to the new buyer and often the moving van is waiting at the door to move in the buyers belongings.

A home sale contingency can work out well for all parties, when the considerations noted above are incorporated and lines of communication stay open. 

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Rainmaker
1,296,455
Jon Kolsky
Kolsky Realty & Management - Long Beach, CA
Licensed California Real Estate Broker

Donna~ wow, too funny! I just posted a blog about the contingency process, but yours blows mine out of the water....GREAT JOB

Apr 30, 2014 03:55 AM #1
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Jon - Great minds think alike! Have a good night.

 

May 01, 2014 11:34 AM #2
Ambassador
1,996,993
Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES
Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL
Florida Waterfront and Country Club Living

Donna, good job explaining this complicated contingency.  Every case is different, sometimes it's a good solution for all parties, other times, it's not.

May 02, 2014 05:57 AM #3
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Silvia - I agree! It depends on the situation if a contingency is in the best interest of buyer and seller. 

May 03, 2014 02:36 AM #4
Rainmaker
883,863
Elyse Berman, PA
Best Connections Realty, Inc. - Boca Raton, FL
Boca Raton FL (561) 716-7824 CRS, ABR, GRI,ePR

Donna,  I've used this on occassion with a kick-out clause.  Each sale is different, but it can work if you have cooperating parties.  Great explanation!

May 23, 2014 10:51 AM #5
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Elsye - My sellers also usually respond to a contingency with a kick-out clause if they are going to accept it. Glad to hear it has worked for you!  Thanks!

May 23, 2014 11:28 AM #6
Rainmaker
2,813,984
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher
Just need to clarify everything up front and everything takes care of itself I find.
May 23, 2014 04:43 PM #7
Rainmaker
1,734,655
Sam Miller
RE/MAX Stars Realty - Howard, OH
Knox County Ohio Real Estate Specialist

Donna, Nice explanation of the home sale contingecy.  In our market most use a 24 hour contingency release clause.

May 23, 2014 05:17 PM #8
Rainer
291,685
Apple Valley Lake
REMAX Stars Realty - Howard, OH

Home sale contingencies can be a real challenge in many markets especially if you are working in a resort market.

May 23, 2014 05:51 PM #9
Rainmaker
823,438
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent

We are the land of few contingencies these days.  The market is just too fluid to tolerate them, right now.

May 23, 2014 08:32 PM #10
Rainer
103,157
Rosie Moore
Serving Sugar Land, Richmond, Rosenberg, Missouri City - Sugar Land, TX

Excellent post! My first sale included a home sale contingency. Luckily, everything worked out for my sellers.  Thei house went under contract in 7 days, and we had two closings on the same day.

May 23, 2014 09:57 PM #11
Rainmaker
1,391,977
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Donna, I can see where multiple offers are common, sellers will go with the non-contingent offer. Then again the seller has the same problem. There home is under contract and they have to find a home in the next thirty days.

May 23, 2014 10:46 PM #12
Rainmaker
3,317,568
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

When the market was slow in Charlotte, sellers typically didn't take contingent contracts because there was no guarantee the buyer could sell their home; now when the market is hot, there's no reason to take a contingent contract.

May 23, 2014 11:21 PM #13
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Laura - It is important that everyone is clear about how the contingencies work. Thanks!

Sam - Most sellers in my area also use a 24 hour kick-out clause also.

Apple Valley - I'm sure resort areas post different issues. Many times the buyer of a second home can buy without a contingency.

Chris - I have heard that some areas are so fast that contingencies are not used. Sounds like your area is one of them.

Rosie - I love when that happens! Everyone is happy at closing.

Michael - that is so true. I becomes a chain of closings and contingencies!

Nina - I find it is only for a handful of buyers that contingency offers work. Mostly when the buyers home is already under contract. 

Thanks!!!

 

May 24, 2014 01:02 AM #14
Rainmaker
592,790
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

You better sell your home first here, because I will be strongly recommending to the seller that they refuse that contingency. Your home is removed from the market and you might miss a buyer.

What if the buyer's buyer needs to sell a home? Dominoes and major problems.....

May 24, 2014 01:09 AM #15
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Than - every situation is unique. Contingencies only work some of the time. It sounds like your market is a very hot sellers market!

May 24, 2014 01:16 AM #16
Rainer
482,047
Bruce Kunz
C21 Solid Gold Realty, Brick, NJ, 732-920-2100 - Howell, NJ
REALTOR®, Brick & Howell NJ Homes for Sale

Great Post, Donna. Good explanation for any buyers or sellers to read thru.
I've seen this contingency accepted here with a kick-out, too. Often the listing is allowed to continue as active & the situation is mentioned to anyone interested after that. Most of the time having the initial contract comforts both sides at least a little bit.
Thanks for sharing,
Bruce

May 24, 2014 06:45 AM #17
Ambassador
1,690,121
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

At one time out Oklahoma City MLS system made you put a contingency contract as a pending sale which eliminates the listing being shown by other agents. Now we allow it to stay active but we have a field to show contingency contract in place. If I do this and normally I don't, I make sure that it is a verbal 24 hour period in which to tell the buyer they have to perform and they have to show that they can from their lender or show cash.

May 24, 2014 06:54 AM #18
Rainmaker
168,539
Donna Quinlan
Keller Williams Realty - Newburyport, MA
Keller Williams Real Estate Agent Career Consultan

Bruce - In my area mls the homes that are under agreement with a contingency are listed as CTG but stay in the active list of homes for sale. There is a symbol where the home contingency shows.  I agree it's good to keep it showing with the actives  in mls. Thanks!

Joe - Sounds like my mls treats contingent listings the same as yours does. We also usually use 24 kick out clauses. Thanks!

 

May 24, 2014 08:14 AM #19
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Donna Quinlan

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