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. 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.