Home Sale Contingencies that Buyers and Sellers Need to Know

By | February 6, 2014

The home sale contingency or contingency clause is frequently included in the real estate purchase offer or the sales contract. If this is in place, the real estate transaction is contingent or dependent upon sale of the buyer’s house. If the house of the purchaser got sold by the time of agreed date, the contract will be executed, if not automatically terminated.

Contingencies: There are two types of contingencies, sale and settlement contingency and settlement contingency.

  • Sale and settlement contingency: It depends upon the buyer’s property selling and settling the existing house. This is generally used when the buyer accepted a purchase offer on current home and has not yet received. Normally in this contingency, the seller has the flexibility to market his/her home to other buyers. If the seller receives another offer, he/she will give an opportunity to remove the settlement contingency or the sale within a specified time of typically 24 to 48 hours. If the buyer cannot remove, the contract will be terminated and the other seller can accept other offer. The deposited money will be returned to buyer.
  • Settlement contingency: It is used if the buyer has already has a contract to sell his or her property and the settlement date fixed. Until the settlement or closing takes place, the property is not truly sold. If sale fall with any reason, it protects the buyer. In most of the cases, for a specific period, this contract prohibits the seller to market or to accept other offers on the property. If the buyers home does not close, contract will be terminated, if closed, it will valid.


  • For buyers: When purchasing more expensive house, most of the buyers have to sell their house. The home sale contingency gives the time to buyer to sell existing house and to settle. It also helps the buyers to avoid holding two mortgages and two homes at a time. The buyer can sell his home and immediately move to the next one as it is already locked in. the home sale contingency can bring peace of mind to buyer but other costs of home buying does not avoid. Buyers must have to spend on appraisal fees, bank fees and home inspections, and these are not refundable if the property is not selling on time and the deal falls.
  • For sellers: There is no guarantee as the house will sell, so this is risky to sellers. Even the seller has the chance to market his home and enter into the contract with others, under contract house might less attractive to the others. Before agreeing investigate the buyer’s current home to determine – if the house is not on the market indicates the buyer is only thinking about buying. If listed at correct price, comparables can be prepared by a real estate agent to make sure home is priced to sell. If the house is on the market for a long time indicates the market is either dry or priced too high.

Details of any contingency must be specified in the sales contract. Because these are legally binding. Home sale contingency terms review and understand is important. A real estate attorney or a qualified real estate professional should be consulted if you have any concerns or questions relating to home sale contingency clauses in the real estate contracts.