A contingent home sale clause serves as a financial safeguard for buyers looking to purchase a new home before selling their current one. This clause explicitly states that the buyer’s obligation to purchase is contingent upon selling their existing home within a specified timeframe, typically between 30 to 90 days. If the sale of the current home fails to close during this period, the buyer is entitled to withdraw from the new purchase contract, usually retaining their earnest money deposit.
This type of contingency is popular because it helps buyers avoid the risk and financial burden of carrying two mortgages at once. However, it introduces complexities for sellers, who often prefer non-contingent offers for a quicker sale.
To address this, sellers may insist on a kick-out clause within the contract. A kick-out clause allows the seller to continue marketing the property and accept backup offers. If a superior offer is received, the original buyer is typically given 24 to 72 hours to remove the contingency (proceed without needing to sell their home) or relinquish the contract, enabling the seller to move forward with the new buyer.
Buyers aiming to strengthen a contingent offer can take strategic steps such as offering a competitive price, increasing the earnest money deposit, having their current home market-ready, and agreeing to a shorter contingency period. For sellers, accepting a contingency may be advantageous in slower markets or when the contingent buyer is pre-qualified and serious.
Understanding how a contingent home sale clause works can help both buyers and sellers navigate the timing challenges of buying and selling homes. For more on related contract protections, see Mortgage Contingency and for seller protections, learn about the Kick-Out Clause.
For authoritative information, visit the Consumer Financial Protection Bureau’s guide on contingencies.
