Sales Contingency: What is it, how does it effect the seller, and how does it effect the buyer?

A sales contingency is a clause in a real estate contract that makes the purchase of a home dependent on the successful sale of the buyer’s current property. This clause provides a safety net for buyers, allowing them to secure a new home while navigating the sale of their existing one. However, it can also introduce complexities and potential delays for both buyers and sellers.

For Buyers: What to expect

• Protection: A sales contingency offers protection by ensuring that you won’t be obligated to purchase a new home if you can’t sell your current one.
• Potential Delays: Sales contingencies can lead to delays in closing, as the buyer’s ability to purchase the new home hinges on the sale of their existing property. In some states such as New York, real estate sales can more often than not extend 30-45 days past the anticipated closing date. This creates a domino effect on transactions that include sales contingencies.

For Sellers: What to expect

• Uncertainty: A sales contingency can create uncertainty for sellers, as it means the buyer’s ability to complete the purchase is dependent on another transaction.
• Stronger Offers: To mitigate these risks, sellers might want to consider accepting offers from buyers who are not subject to sales contingencies, as these offers can provide more certainty and a smoother closing process.

Tips for Buyers:

• Be Realistic: When including a sales contingency in your offer, be realistic about the timeline for selling your current home. If you are in a strong seller’s market, talk with your realtor about listing your home before you begin the search for your next one. Making an offer with a sale contingency of a home that is already under contract is much more appealing than a home that is not yet on the market.
• Strengthen Your Offer: Consider including a stronger offer, such as a higher purchase price or higher earnest money deposit (a.k.a initial down payment), to make your offer more attractive to the seller. Talk with your realtor, attorney, and financial team on how to best approach this.
• Communicate Openly: Maintain open communication with the seller and their agent to keep them informed about the progress of selling your current home. Keep them updated on appraisal and outstanding mortgage conditions when applicable to show the sale is moving along. Your realtor and attorney can help guide you on this and keep the other party in the loop when necessary.

Tips for Sellers:

• Evaluate Offers Carefully: When considering offers with sales contingencies, weigh the pros and cons carefully. Consider how far along the sale of the buyer’s home is (i.e. has it been listed? are there any offers?).
• Negotiate Strong Terms: If you do accept an offer with a sales contingency, negotiate strong terms, such as a shorter contingency period or a backup offer. You don’t want to be stuck in limbo.
• Consider Other Offers: Don’t be afraid to consider offers from buyers who are not subject to sales contingencies, as these offers may provide more certainty and a faster closing process.

By understanding the implications of sales contingencies, both buyers and sellers can make informed decisions and navigate the real estate market with confidence.

Our team has handled countless transactions with sales contingencies involved. We prioritize guiding our clients through a smooth transaction that exceeds their goals for their move. Call us or fill out the form below to get started on your move today.

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