Home sales sometimes are subjected to contingency agreements because the buyer has an existing home that he or she needs to sell. Before agreeing to a contingency, both buyer and seller should understand all the aspects of the contract.
How does a contingency clause work?
When there is a contingency clause on a home sale, it essentially means the buyer is agreeing to purchase the property contingent on him or her being able to sell an existing home. The contract usually stipulates that the seller can continue to show the home to other buyers and if an offer is received, the buyer has a period of time, usually 24-48 hours, the remove the contingency. In this case, the buyer either has to get the home sold, agree to move forward without first getting his or her home sold, or back out of the deal.
A contingency clause can have several benefits for buyers. It ensures that a buyer won’t get stuck paying mortgages on two homes at once or having to get a bridge loan. It also gives the buyer the ability to look for homes to buy while simultaneously trying to sell their own home. If the buyer needs some work done to the home and is having Alair Homes or another company doing the work, it can buy time to get the remodeling completed.
Advantages for sellers
On their surface, contingency clauses may not look very beneficial to sellers, but they do have some advantages. Sellers should insist that any contingency clause allow them to continue to market the home to other potential buyers. In that case, the seller has the advantage of having a buyer while being able to still pursue backup buyers. If the house has been on the market for a long time, getting any offer, even one with a contingency, is a plus.
Considerations
Any seller who accepts a contingency clause should be sure the buyer is serious and is actively working to sell his or her home. The seller might want to have his or her agent check to ensure the buyer’s home is listed and that it is priced appropriately. Accepting a contingency could mean missing out on other offers, because even if the buyer can continue to show the home, it might be entered into the MLS as “sale pending” or “under contract.” Buyers need to be aware that the contingency won’t last forever and that if they can’t sell their home, they will lose out on the one they want to buy. Buyers should have a backup plan in place.
