Many people who purchase real estate are already homeowners. They want to upgrade to a larger space as their families expand or may want to move into a smaller, more accessible home as they prepare for retirement.
Homeowners seeking to purchase a new property often need to plan carefully to ensure that they don’t overextend themselves. They typically do not have the income to maintain two separate mortgages indefinitely.
They need to arrange for the sale of their homes promptly to keep their recurring costs manageable. A sale contingency clause can protect buyers who also need to sell their homes.
What is a sale contingency clause?
Contingency clauses are contract inclusions that allow for the cancellation of the agreement in specific circumstances. A sale contingency clause is relatively common, as many people must sell their current home to afford a new one.
These clauses include language in their initial offer or the final purchase agreement that allows them to cancel the transaction if they cannot sell the home that they currently own in a specified amount of time. The contingency clause protects their earnest money. They do not face a financial penalty if they must cancel the scheduled closing because they cannot sell their current residence quickly enough.
Working with a real estate attorney when preparing to make an offer or list a property can take much of the risk out of the process. Buyers need to protect themselves when making offers –especially when a residential real estate transaction hinges on the ability to secure capital from selling a home.