Home Sale Contingency Explained: A Quick Guide for Sellers

Buying a home is a big deal, and you want to make sure it’s perfect before you sign. One way to do this is with a home sale contingency. Essentially, contingencies make sure all your conditions are met before actually buying the home, but we’ll break down contingencies more in this article. Whether you’re buying your first home in Boulder, CO, or a vacation home in Myrtle Beach, SC, it can be smart to add a contingency during the buying process. Our experts at Redfin Real Estate will help break it down below. 

Key takeaways

• A home sale contingency protects buyers from owning two properties at once.
• Sellers can assume risk such as uncertainty and delay when agreeing to a contingent offer, which can be helped by a kick-out clause.
• When deciding to accept a home sale contingency, consider market conditions and personal timing preferences. 

Table of Contents

• What is a home sale contingency?
• How does a home sale contingency work?
• Pros and cons of a home sale contingency
• Should I sell with a contingent offer?
• FAQs about home sale contingencies

What is a home sale contingency?

A home sale contingency is a term added to a real estate purchase agreement by the buyer that makes the sale conditional on the buyer selling their current home first. Contingencies are often put in place to protect the seller, with this type of offer more likely to be rejected in a seller’s market.

How does a home sale contingency work?

1. The buyer submits an offer with a home sale contingency clause.
2. The seller receives the offer and decides to either accept, reject, or negotiate.
3. If the seller accepts, the buyer has a specified time frame to sell their home as outlined in the clause.
4. Often the seller will add a kick-out clause to the agreement, which allows the seller to market their home and if a better offer comes in, requires the original buyer to either drop the contingency or walk away.
5. If the buyer sells their home, the deal proceeds and they can finalize their home purchase.
6. If the buyer does not sell their home in the timeframe, the agreement is canceled without penalty (the buyer’s earnest money is refunded), or they can ask for an extension, which the seller can approve or deny.

Pros and cons of a home sale contingency

Should I sell with a contingent offer?

While each situation differs, consider your personal priorities, the local market conditions, and your risk tolerance before deciding to accept a contingent offer. 

Consider accepting a contingent offer if:

• It’s a buyer’s market: Being flexible can help attract serious buyers and avoid having your home sit on the market for a while.
• The buyer’s home is already under contract: If the buyer has already accepted an offer on the home they’re selling, your risk and closing time will typically be lower.
• The home is in a “hot” market: If the buyer’s home looks like it’ll sell quickly, this is likely to also reduce your risk and time for closing.
• You’re not in a hurry to sell: If you’re not under time pressure and are comfortable waiting, you won’t be concerned with closing delays.
• You add a kick-out clause: Adding a kick-out clause acts as a safety net to help you get a better offer and avoid closing delays.

Consider denying (or negotiating) a contingent offer if:

• It’s a seller’s market: In a seller’s market, you’re likely to get non-contingent offers with stronger terms.
• You have other offers: Similarly, if demand for your house is high, taking the risk on a contingent offer is likely not worth it.
• The buyer’s home isn’t listed yet: You’ll likely endure closing delays if the buyer hasn’t even started selling their home.
• You need certainty on timing: Home contingencies can’t offer timing certainty, so accepting one could derail your plans.

FAQs about home sale contingencies

How long does a home sale contingency last?

While the terms are negotiable, a home sale contingency typically lasts 30-60 days.

What happens if the buyer doesn’t sell their home in time?

If the contingency period ends and the buyer hasn’t sold their home, the agreement is canceled without penalty for the buyer and leaving the seller free to accept other offers. The buyer could also ask for an extension, which the seller can accept, deny, or negotiate. 

Can a buyer waive a home sale contingency?

Yes, a buyer may waive a home sale contingency to make their offer more appealing to the seller. However, they then run the risk of owning two homes at once.

As a buyer, how do I make a home sale contingency offer attractive to sellers?

Having your home listed, offering a competitive purchase price, having a shorter contingency time period, agreeing to a kick-out clause, and increasing the earnest money deposit are all great ways to make a home sale contingency offer more attractive to sellers.

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