Definition
Home-sale contingency is a clause in a real estate purchase contract that makes the buyer’s offer conditional on selling their current home within a specified time. If the seller of the buyer’s existing house doesn’t close by the deadline, the buyer can cancel the purchase without penalty and typically gets their earnest money back. This protects buyers who need sale proceeds to afford the new home or want to avoid carrying two mortgages.
How it works
- Offer submission: Buyer includes a home-sale contingency in the purchase offer.
- Seller response: Seller can accept, reject, or negotiate the contingency terms.
- Contingency period: A set window (commonly 30–90 days) is given to list and sell the buyer’s current home.
- Sale completes: If the buyer’s home sells and the sale closes within the period, the purchase moves forward.
- Contingency not met: If the home doesn't sell in time, the contract is voided and the buyer is released without losing earnest money.
Common types
- Sales contingency: The buyer must sell their current home before closing on the new one — used when the home isn’t listed or hasn’t received offers.
- Settlement contingency: The buyer has accepted an offer on their current home and needs that sale to close before purchasing the new property.
- Kick-out clause: Allows the seller to keep marketing the property and accept backup offers; if the seller gets a better offer, the original buyer is notified and typically has a short period (often 48–72 hours) to remove the contingency or step aside.
Real-world examples
Example 1 — Buyer needs equity
Sarah needs proceeds from her current home to fund a down payment. She offers on a new home with a 60-day home-sale contingency. If she sells within 60 days, the purchase proceeds; if not, she walks away and recovers her earnest money.
Example 2 — Seller’s perspective
John lists in a slow market and receives an offer with a home-sale contingency. He negotiates a kick-out clause so he can keep showing the property. If a new buyer appears, the original buyer has a few days to remove the contingency or let the deal fall through.
Example 3 — Hot market
Emily receives multiple offers; one includes a home-sale contingency while others are cash or financing without contingencies. She’s likely to choose a non-contingent offer to reduce risk and ensure a faster, certain sale.
Pros and cons
For buyers
- Pros: Reduces financial risk, prevents holding two mortgages, provides time to sell current home.
- Cons: Makes the offer less attractive in competitive markets and may be rejected in favor of cleaner, non-contingent offers.
For sellers
- Pros: Can help sell in a slow market or move a unique property that attracts buyers who need time to sell.
- Cons: Increases the chance the deal will fall through and can prolong the sale process.
When it’s appropriate
Home-sale contingencies are most useful when interest rates or inventory make selling a current home uncertain, when the buyer needs sale proceeds for a down payment, or when the buyer prefers to avoid bridging two mortgages. Sellers in slow markets or with hard-to-sell properties may accept them, while sellers in hot markets will usually prefer offers without contingencies.
Practical tips
- Set a realistic contingency period (commonly 30–90 days) and be prepared with a pricing and marketing plan to sell quickly.
- Consider accepting an offer with a contingency only if it includes a strong price, a reasonable timeline, or a kick-out clause.
- Buyers can make their contingent offers stronger by providing higher earnest money (while ensuring it’s refundable under the contingency), including mortgage pre-approval, or offering flexible closing dates.
Bottom line
A home-sale contingency is a buyer-protecting clause that links a purchase to the successful sale of the buyer’s current home. It can smooth transitions and reduce financial risk for buyers but introduces uncertainty for sellers, so its use should reflect local market conditions and the priorities of both parties.
