What does "home sale contingencies" mean in real estate?
A home sale contingency is a contract clause that makes a buyer’s obligation to purchase a new property conditional on successfully selling their current home within a specified timeframe. It protects buyers from owning two homes or being forced to close without the proceeds or financing they expect. If the buyer’s home doesn’t sell in the agreed period, the buyer can typically cancel the purchase without penalty.
How a home sale contingency works
- Buyer includes the contingency in their purchase offer, specifying conditions (time limit, listing status, required sale price).
- The seller decides whether to accept the offer as-is, negotiate terms, or reject it in favor of a non-contingent buyer.
- Sellers often add a kick-out clause allowing them to keep marketing and accept backup offers; the contingent buyer must then remove the contingency or step aside.
- If the buyer's home sells within the timeframe, the contingency is released and the transaction proceeds to closing. If not, the buyer can walk away and usually keep their earnest money deposit.
Common contingency terms
- Time window: Commonly 30–90 days (example: "60 days to sell").
- Sale status: Specify whether the buyer’s current home is “already listed,” “under contract,” or “not yet listed.”
- Price/financing condition: Tie contingency to receiving an acceptable offer or securing financing contingent on sale proceeds.
- Kick-out clause: Lets the seller continue marketing and replace a contingent buyer if a better offer arrives.
Practical examples
- Buyer gives themselves 60 days to sell their current home. If no acceptable offer arrives, they may cancel the purchase and retain earnest money.
- Seller accepts a contingent offer but inserts a kick-out clause; a new offer comes in, the seller notifies the contingent buyer, who then must remove the contingency or let the seller proceed with the new buyer.
- In co-owned or partition sales, contingencies can be tailored to allow time to sell an ownership interest or finalize related financing.
Pros and cons
For buyers
- Pros: Reduces financial risk, avoids double mortgage payments, gives leverage to walk away if sale fails.
- Cons: Less competitive in hot markets; sellers may reject or demand tighter terms.
For sellers
- Pros: Expands buyer pool in slow markets when other offers may be scarce.
- Cons: Increased risk and potential delay; may require kick-out clauses or backup offers to mitigate risk.
When sellers are more likely to accept contingencies
- Slow markets or higher interest rates—fewer non-contingent buyers available.
- When the seller values a particular buyer’s offer despite the contingency (e.g., strong price or fewer repair requests).
- When contingency terms are tightly written (short time window, proof of listing, clear sale triggers).
Negotiation tips
- Buyers: Be transparent—show that your home is actively listed and consider strengthening the offer (higher price, larger deposit, or shorter contingency period).
- Sellers: Use a kick-out clause and request proof of active marketing or an accepted backup offer to reduce downtime.
- Both parties: Specify exact deadlines, what constitutes “an acceptable offer,” and procedures for notice and removal of the contingency.
Quick FAQs
Will I lose my earnest money if my home doesn’t sell?
No—if the contract’s home sale contingency is valid and the buyer timely follows its terms, they can usually cancel without forfeiting earnest money.
Can a seller force me to remove the contingency?
No, but a seller can invoke a kick-out clause by presenting a better offer; the buyer then must remove the contingency or let the seller proceed.
Does the contingency apply if my home is already under contract?
Yes—many contingencies are written to recognize a current under-contract status and may allow closing only after that sale closes.
Should I waive a home sale contingency?
Only if you can afford two mortgages or have alternate financing in place. Waiving can make your offer stronger but increases personal financial risk.
Bottom line
Home sale contingencies balance buyer protection and seller risk. Their acceptability depends on local market conditions, the specific contract language, and negotiation strategy. When used carefully—with clear timelines and protective clauses like a kick-out—they provide a straightforward legal mechanism for buyers who need to sell before they can buy.
