Trying to put a new home in contract while you haven’t yet sold yours can be a challenging and frustrating experience. The most common method of doing that is a home sale contingency contract.
An offer/contract with a home sale contingency is the standard option when buyers feel that they have found their “dream home,” BUT haven’t sold theirs yet.
The prospective buyers don’t want to “lose” that dream but have issues. There are several potential reasons for buyers to offer a contract with a home sale contingency, typically they can’t afford to carry two mortgages and don’t want to move twice.
However, in a seller’s market, contingent offers can make it very difficult for buyers with a contingency to compete because sellers are uncomfortable with them – especially if there is a possibility of other/multiple offers.
Many sellers won’t even consider accepting an offer with a home sale contingency. They believe that their home has enough benefits to generate other non-contingent offers and don’t want to take the chance of missing a chance for a quicker and easier sale.
Those who will consider one will usually have some conditions. It’s important for buyers to understand these and choose those with which they are most comfortable. The typical condition will be an escape clause that gives the sellers the maximum flexibility.
Escape Clause and First Right of Refusal
If a seller agrees to work with an offer containing a buyer’s home sale contingency, they will most likely impose an escape clause that includes:
- Giving the sellers the right to keep their home on the market until a final sale is made
- Having First Right of Refusal which forces the contingent buyers the right to waive their contingency and go into final contract if the seller gets another non-contingent offer
- If the contingent buyers can’t or don’t want to go forward with their offer/contract, the sellers can terminate the contract and move forward with the non-contingent offer
An Alternative Option – Deposit
Buyers can be proactive and safeguard their chances to get their dream house by offering the sellers an incentive – a non-refundable deposit in exchange for waiving the escape clause. (It’s likely that this offer would be based on a “reasonable time frame” for the sale of the buyers’ home.)
Benefits to the Prospective Buyers
With a non-refundable deposit, the buyers have the security of knowing that their offer – including the price it contains – has been accepted. This is critical for the prospective buyer.
They are protected from selling their current home and having the seller terminate the contract for a non- contingent offer, which would be a stressful situation for the buyer – to say the least.
Benefits to the Sellers
If for whatever reason the prospective buyers can’t sell their home – within a reasonable time frame – the sellers don’t walk away empty handed if things don’t work out –they get to keep the deposit.
It’s a win/win for all parties because everyone has some “skin in the game.”