Are you considering selling your home but unsure about accepting an offer with a home sale contingency? This type of offer can be intimidating and confusing, but it’s important to understand how it works before making a decision. In this Redfin article, we’ll explain the pros and cons of accepting a home sale contingency and how it can benefit sellers.
What is a Home Sale Contingency?
A home sale contingency is a condition in a real estate contract that states the sale of the buyer’s current home must take place in order for the purchase of the new home to go through. This means that the buyer’s offer on your home is contingent on them selling their own home within a specific timeframe. If they are unable to sell their home within that timeframe, the contract becomes void and they can back out of the deal without any penalties.
Pros of Accepting a Home Sale Contingency
1. Increased Buyer Pool
One of the biggest advantages of accepting a home sale contingency is that it opens up your home to a larger pool of potential buyers. Many buyers may be hesitant to make an offer on your home if they haven’t sold their own yet. By accepting a home sale contingency, you can attract more buyers who may not have been able to consider your home otherwise.
2. Higher Offer Price
In a competitive market, buyers may be willing to pay more for a home in order to secure the deal. By accepting a home sale contingency, you may be able to negotiate a higher offer price from the buyer in exchange for the extra time they need to sell their home.
3. Flexibility for the Seller
Accepting a home sale contingency can also provide more flexibility for the seller. Instead of having to rush to find a new home after selling their current one, the seller can take their time and find the perfect home without the added pressure of being homeless.
Cons of Accepting a Home Sale Contingency
1. Risk of Delayed Closing
The biggest disadvantage of accepting a home sale contingency is the risk of a delayed closing. If the buyer’s home doesn’t sell within the specified timeframe, the contract may fall through and you’ll have to put your home back on the market. This can be frustrating and may cause delays in your own plans to move.
2. Potential for Lower Offer Price
In some cases, buyers may use a home sale contingency to negotiate a lower offer price. They may argue that they are taking on more risk by having to sell their home first and therefore, should pay less for your home. This can result in a lower profit for the seller.
3. Limited Options for Backup Offers
Accepting a home sale contingency means that you won’t be able to accept any backup offers on your home. This means that if the buyer’s home sale falls through, you’ll have to start the selling process all over again.
How to Protect Yourself
If you do decide to accept a home sale contingency, there are steps you can take to protect yourself. First, make sure to include a kick-out clause in the contract. This allows you to continue to market your home and accept backup offers. If a better offer comes along, the buyer will have a certain amount of time to remove the contingency or back out of the deal.
You can also set a deadline for the buyer to sell their home. This will prevent the contract from dragging on for months and potentially causing delays in your own plans to move.
In conclusion, accepting a home sale contingency has its pros and cons. It can open up your home to a larger pool of potential buyers and potentially result in a higher offer price. However, it also comes with the risk of a delayed closing and potential for a lower offer price. It’s important to carefully weigh these factors and take steps to protect yourself before accepting a home sale contingency. Happy selling!
