What Is a Home Sale Contingency Clause?

 Posted on March 25, 2022 in Real Estate Law

There is no doubt that the real estate market in Connecticut and across the country has been booming over the past year or so. With so many homeowners putting up “for sale” signs on their front lawns, many people are quickly making the move to upgrade from where they currently reside. A lot of these buyers find themselves making offers on a new home before their current home has sold in order not to lose their chance at the new home. Homebuyers who are in this situation can have a “home sale contingency” clause added to their purchase and sale agreement. This clause voids the agreement for the sale of the new home in the event the buyer is unable to sell their current one.

Types of Home Sale Contingencies

There are two types of home sale contingencies clauses, sale and settlement contingency or settlement contingency.

A sale and settlement contingency is one used in the event the buyer has not yet received an offer to sell their home. By using this clause, the seller is still allowed to keep actively marketing their home, however, the clause creates the stipulation that if the seller receives another offer on the home, the buyer has a specific window of time to remove the sale and settlement contingency. If the buyer is unable to remove the contingency, the agreement is void and the seller returns whatever deposit the buyer had put down on the property.

The second type, a settlement contingency, is used if the buyer has a closing date scheduled for their current home. With this type of clause, if something should happen and the closing on the buyer’s current home does not take place, the agreement can be terminated.

Factors to Consider When Using a Home Sale Contingency

There are a couple of things for a buyer to consider when deciding whether to request a home contingency clause in their agreement. The first factor is what type of effect the contingency could have on the price of the new home. Since the buyer is asking the seller to take a risk their current home will not sell, the seller may want to be compensated for that risk and that could increase the price of the home.

The second factor to consider is how much money the buyer may end up spending for appraisal fees, home inspections, etc., before they have even sold their own home. Should the purchase and sales agreement end up getting terminated, the buyer is out all of that money.

Contact a Stamford, CT Real Estate Attorney

If you are in the market for a new home, make sure you have an experienced Fairfield County real estate lawyer looking out for your best interest. Call Law Offices of Daniel P. Weiner at 203-348-5846 to schedule a free consultation.

Source:

https://www.investopedia.com/articles/personal-finance/111513/home-sale-contingencies-what-buyers-and-sellers-need-know.asp