Writing a home sale contingency clause



Note: This article is an excerpt from The Digital Paper Trail

The home sale contingency clause can be complicated to both structure and present to your buyer or seller. As the real estate professional it is critical to understand the risks and benefits for your clients as well as draft an agreement which can be clearly understood and adhered to by the parties.

Here are some important things for you to consider as you structure the agreement.

 1. Will there be early or late occupancy and possession to allow the two properties to close simultaneously? A seller will be hard pressed to pack their moving truck if the buyer purchasing their home can terminate last minute because their home did not sell.

 2. Will the Seller accepting the offer with the contingency have the opportunity to review the contract the Buyer receives or has already received on their home? Remember not all contracts are created equal, it’s important for the seller to understand the viability of the buyers home selling.

 3. Will the Seller be allowed to continue marketing their home with the opportunity to “bump” the buyer should a better offer come in or will the Seller honor the buyers offer until the expiration of the home sale contingency or closing? This is often referred to as a “Right of First Refusal.”

 4. Can the buyer qualify for a loan or pay cash if their home does not sell? Many times the seller believes they simply have to wait for the home sale contingency deadline to pass then the buyer will be expected to close the sale. When in reality most buyers must sell their home in order to obtain a new loan or access the cash for the new home and in this scenario the buyer is still protected by their loan conditions contingency. If the buyer removes their contingency they should be required to provide evidence that they can obtain the loan or cash needed for the seller’s home.

Contingency clause examples

Below are home sale contingency clause examples. These were taken directly from The Digital Paper Trail. Real estate agents, brokers, and salespersons should always consult their managing broker or legal counsel when creating legal agreements.

 1. Seller is aware that Buyer must sell an existing home to be able to buy the Property. A portion of the down payment, and the ability to qualify for a new loan, are conditional upon the sale and closing of Buyer’s existing home located at _________. In the event Buyer does not enter into a firm contract to sell his existing house and deliver a copy of the same to seller within _ days of acceptance of this offer, Seller may declare this Contract null and void, and all deposits shall be returned to Buyer.

-or-

 1. Seller is aware that a portion of the down payment will come from the proceeds of the sale of Buyer’s home located at _________. In the event Buyer does not enter into a firm contract to sell the above referenced property and deliver the contract to Seller within days of acceptance of this offer, Seller may declare this Contract null and void, and all deposits shall be returned to Buyer.

 2. In addition, Seller shall have _ days from receipt of said Contract for the sale of Buyer’s property to approve the same in the sole discretion of Seller and deliver evidence of approval to Buyer or the salesperson assisting Buyer.

 3. In the event Buyer’s property is unable to close pursuant to the terms of this Contract within the time period provided, Buyer may once extend the closing date specified in this Contract for a period not to exceed __ calendar days.

The above examples do not include a first right of refusal provision. That will be covered in a separate article.



Thanks to the late Oliver Frascona, a previous Shareholder in the law firm of Frascona, Joiner, Goodman and Greenstein, P.C. He also ran The Real Estate School, one of Colorado premier continuing education sources for real estate professionals.