Contingency Contracts

There are a few ways to buy a house before or while selling your current home. The most common way is by using a contingency contract.

A contingency contract is basically a normal purchase contract, but it is contingent or dependent on the buyer selling another property, usually, it’s their current home.

These contracts aren’t always a seller’s favorite offer to accept. There’s a chance that the buyer’s current property won’t sell in the allotted time, so it’s a risk. Naturally, a contingency contract is more appealing to a seller if the buyers’ house is already under contract. If the buyer/seller gets to the end of the purchase contract and the buyer’s contingent property hasn’t sold, the parties can choose to extend the contingency contract or let it run out. A normal contract to close time is 30-45 days. In a contingency contract, if the buyers’ house is not currently under contract, it’s nice to be able to have 60-90 days to allow time to get the existing home sold, but that’s not always an option in a hot market.

Here’s the hiccup to buyers, while a seller has a signed contingency contract in the process, they can still try to get another offer. If the seller does get a new offer (usually noncontingent) that they would like to accept, they have to go back to the original contingency offer and let them know. At that point, the contingent buyer has 3 days (or whatever number was specified in the contract) to make one of two choices. They can either remove the contingency part of the contract and proceed with the purchase or withdraw the contract altogether. If this happens the buyer does receive their earnest money back but is still out option money and payments for any inspections that were completed. If the buyer’s current home is under contract and everything looks like it’s smooth sailing and headed towards closing, most sellers won’t rock the boat by taking a different offer. That could mean additional inspections, an option period, and a longer closing time for them.

There are lots of moving parts to a contingency contract! It takes a lot of strategic planning on your Realtor’s part to help everything fall into place but it is definitely possible and accomplished all the time!