Gone are the days when real estate buyers could easily make offers on homes without contingencies. In today’s market, most offers include at least one contingency designed to protect the buyer’s interests. While financing contingencies remain common, one that’s making a strong comeback is the home sale contingency.

In competitive markets, buyers once waived contingencies to make their offers more appealing. Now, more buyers are taking a cautious approach, especially when it comes to selling their current homes. Contingencies give buyers peace of mind that they won’t get stuck juggling two properties if their home doesn’t sell on time.

What Is a Home Sale Contingency?

A home sale contingency is a clause in a real estate purchase agreement that makes a buyer’s obligation to purchase a new property dependent on the successful sale of their current home. In short, it protects buyers from being legally bound to a new property while still paying for their existing one. Without this safeguard, a buyer could face the stress of managing two mortgages—or even risk losing their deposits if the deal falls through.

How Do Home Sale Contingencies Work in Massachusetts?

In Massachusetts, contingencies are typically included in the offer to purchase and carried into the purchase and sale agreement. The buyer and seller negotiate a specific time frame, usually ranging from 30 to 60 days, during which the buyer must sell their existing home.

If the buyer’s home does not go under agreement or close by the deadline, the contingency allows the buyer to withdraw from the transaction without losing their deposit. In some cases, the buyer may request an extension, but the seller has the right to refuse and move on to other offers.

Common Types of Home Sale Contingencies

While the terms can vary, most home sale contingencies fall into a few categories:

• Sale and Settlement Contingency: The buyer must sell and close on their current home before purchasing the new one.
• Settlement Contingency: The buyer’s home is already under contract, but closing must occur before they proceed with the new purchase.
• Kick-Out Clause: The seller can continue to market the property, and if another qualified buyer comes forward, the original buyer has a limited period (often 48–72 hours) to remove the contingency (undertaking the risk) or walk away.

Negotiating a Contingency: Tips for Buyers and Sellers

When it comes to negotiating home sale contingencies, both buyers and sellers need to approach the process with clear communication and strategic thinking. Here’s what each side should keep in mind:

Tips for Buyers

For buyers, transparency is key. Sellers want reassurance that the buyer’s current home is well-priced, actively marketed, and has a high likelihood of selling within the agreed-upon timeframe. To build trust, buyers should be prepared to provide proof of their home’s listing, as well as details about recent market activity and showings. The more information you can offer to demonstrate your home’s sale potential, the stronger your offer will be. Buyers are encouraged to turn to their real estate agents for expert assistance.

Tips for Sellers

Sellers, on the other hand, need to understand that agreeing to a home sale contingency means taking their property off the market for a certain period. To protect their interests, many sellers negotiate a “kick-out” clause, which allows them to continue entertaining backup offers or even accept a better offer if one comes through. In some cases, sellers may also request evidence that the buyer’s home is already under contract. In a competitive market, it’s essential for sellers to carefully evaluate the strength of a contingency offer against other potential offers that may not have such conditions attached. When a home sale contingency comes into play, keeping timelines firm and limiting open-ended periods helps sellers stay in control of the process.

Alternatives to Home Sale Contingencies

Because sellers may be hesitant to accept a contingent offer, buyers often explore alternatives, such as:

• Bridge Loans: Short-term financing that allows a buyer to purchase a new home before selling their current one.
• Home Equity Loans or Lines of Credit: Borrowing against the equity in the current home to fund the purchase of a new property.
• Renting Out the Current Home: Generating rental income to cover carrying costs until a later sale.
• Extended Closing Periods: Negotiating a longer timeline with the seller to allow more flexibility.

Each option carries its own risks and financial considerations, so careful planning is essential.

The Role of a Real Estate Attorney

In Massachusetts, real estate transactions are attorney-driven, and having the right legal guidance is invaluable. A real estate attorney can:

• Draft and review contingency language to ensure clarity and enforceability.
• Negotiate terms that protect their client’s interests.
• Advise on alternatives, financing options, and the risks involved.
• Help resolve disputes if a home sale does not go as planned.

Conclusion

Home sale contingencies are a useful tool for buyers who need to sell before they can buy, but they require careful negotiation and clear timelines. For sellers, they introduce additional risk but can also expand the pool of potential buyers. Whether you’re considering including or accepting a contingency, working with an experienced Massachusetts real estate attorney ensures that your rights are protected and your transaction stays on track.

At Ligris + Associates, our attorneys regularly advise buyers, sellers, and real estate professionals on contingencies, financing strategies, and contract terms. If you’re preparing to buy or sell a home, contact Meghan Landry to guide you through every step of the process.

Posted In: News