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What is a home sale contingency?

On Behalf of | Jan 11, 2022 | Real Estate Transactions

Contingency clauses are legal devices people use when buying and selling property, giving them a reason to break the contract. These contingency clauses can take on many forms. 

For example, one of the most common contingency clauses is that the sale is dependent on the buyer securing financing. When the buyer makes their offer on the home, the seller can accept it, and the buyer is then obligated to purchase the house if they can get the mortgage they need to do so. If they are denied the mortgage, they are not legally bound to buy the house. 

This may sound like common sense, but it’s important to have the proper contingencies in place so that someone isn’t told they still have to find a way to make the purchase even though they don’t have the money to do so. 

A similar contingency is known as a home sale contingency. Many buyers seek out new houses before selling the homes they already own. They may make an offer on the house but include a contingency, saying they only have to buy if they can sell their current place. They don’t want to be stuck with two homes, and they’ll negotiate an amount of time to sell their current house. 

Why do contingencies matter? 

Contingencies matter a lot because they help to protect buyers. Additionally, sellers want to be very wary about what contingencies they accept. Sellers are not obligated to accept any, and some sellers will give preference to home offers without any contingencies. Either way, it’s important for all involved to understand exactly how the contract is set up and what options they have.