Home Sale Contingency
Explained

A home sale contingency is a clause in a purchase agreement that makes the sale of one property dependent on the successful sale of another.

For buyers, it allows them to finalize the purchase of a new home only if they sell their current home first. For sellers, accepting a contingent offer means they may need to wait longer for the deal to close, but it could attract motivated buyers.

Key Components of a Home Sale Contingency

  1. Sale and Settlement Contingency

    • Explanation: This type of contingency specifies that the buyer must sell and close on their current home before purchasing the new one.

    • Massachusetts-Specific Note: This is common in competitive areas like Boston suburbs, where buyers may need to coordinate timelines carefully.

  2. Settlement-Only Contingency

    • Explanation: This contingency applies when the buyer’s home is already under contract but has not yet closed.

    • Practical Tip: Sellers often view this type of contingency more favorably since the buyer’s home is further along in the process.

  3. Kick-Out Clause

    • Explanation: Sellers can include a “kick-out clause” that allows them to accept a better offer while giving the contingent buyer a chance to proceed by removing their contingency.

    • Massachusetts-Specific Note: In a seller’s market, kick-out clauses help sellers retain flexibility.

  4. Timeframe and Deadlines

    • Explanation: The contingency specifies a deadline for the buyer to sell their home, after which the agreement may be terminated if the sale hasn’t occurred.

    • Buyer Awareness: Buyers should ensure their timelines align with realistic market conditions in Massachusetts.

Why Home Sale Contingencies Matter

Home sale contingencies are essential for balancing risk and flexibility in real estate transactions. Here’s why:

  • Protects Financial Stability: Buyers avoid the burden of owning two homes or rushing to sell their current property at a loss.

  • Enhances Negotiation Options: Sellers can attract motivated buyers while maintaining options to accept other offers.

  • Facilitates Smooth Transactions: By clearly outlining conditions and timelines, contingencies reduce uncertainty and ensure a clear path to closing.

Whether you’re buying or selling, a home sale contingency can make the process more manageable and less stressful. Understanding its components helps both parties approach the transaction with confidence.

FAQ’s

What is a home sale contingency?

A home sale contingency is a clause in a purchase agreement that allows the buyer to finalize the purchase of a new home only if they sell their current home first. It’s a common tool for coordinating timelines in real estate transactions.

How long does a buyer have to sell their home with a contingency?

The timeframe is negotiated in the contract, often ranging from 30 to 90 days. If the buyer doesn’t sell within this period, the agreement may be terminated.

How does a home sale contingency benefit buyers?

It protects buyers from owning two homes at once or rushing to sell their current home below market value. This provides financial stability during the transaction process.

What is a kick-out clause in a home sale contingency?

A kick-out clause allows the seller to accept another offer if the contingent buyer can’t proceed within a specified timeframe. It helps sellers maintain flexibility in a competitive market.

Are home sale contingencies common in Massachusetts?

Yes, especially in markets with varied demand like Boston suburbs, where buyers often need to sell their current home to purchase a new one. Sellers may still consider contingencies if other terms are favorable.

What’s the difference between a sale and settlement contingency and a settlement-only contingency?

A sale and settlement contingency depends on both selling and closing the buyer’s home, while a settlement-only contingency applies when the buyer’s home is already under contract but hasn’t closed. The latter is often more appealing to sellers.