Understanding Home Sale Contingencies
A home sale contingency adds a provision that your purchase of the property is contingent upon selling your existing home. The home sale contingency provides protection for you if you are not able to sell your current home, but it can make an offer less attractive to the sellers.
In the Multi-Board Contract, this is represented in Paragraph 30 by 2 contingencies:
- A date by which you must go under contract to sell your previous home
- A date by which you must close on the sale of your previous home
For the date by which you must go under contract on your previous home, you will want to choose a realistic date when you think you can go under contract.
For the date by which you must close on the sale of your previous home, this should ideally be at least 1 day prior to the closing date on your new property so that you have the funds to purchase your new property. You will want to talk to your lender & attorney about this!
Both of these dates will be specified in the contract.
The “kickout clause” is specified in Paragraph 30(c)(1). If the seller receives another offer to purchase the property, they will notify the buyer. Then, you have a certain # of hours (specified on line 420) to waive the contingencies in Paragraph 30. If you are able to waive the contingencies, then your purchase of the property will continue.
If your financing is contingent on the sale of your existing home, and the kickout clause is initiated, you will need to talk to your lender about options for purchasing the new property without selling your existing property.
The kickout clause can be 24, 48, or 72 hours. 72 hours provides the most time for you to figure out your financing.
If you would like to pursue a home sale contingency, there are 2 ways to approach it:
List your current property, & once it’s under contract, find a new home
- Presents a stronger offer to seller of new property: you’re already under contract
- You are assuming less risk on selling your home, since it hopefully won’t sit on the market
- Shortens your timeline to find a new home – you may need a longer close, a leaseback, or an alternative living arrangement
Find a new home, & then list your current property
- Provides more flexibility in finding your new property, especially if you are looking for a unique property
- Presents a weaker offer to seller of new property, since it’s possible your property may not sell
- May need to do pre-list prep, like decluttering, twice: once for photos/marketing, and then again once you actually list
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