Should I Accept A Contingency Contract?

So, you decided to sell your home; you did your research, you selected the perfect Realtor, and you put up with weeks of showings, open houses, and a daily grind of tidying up the house.

Finally you have an offer! The buyer is well qualified financially, really loves your home and has agreed to your price. There is only one problem: the buyer already owns a home and they cannot buy your home unless they sell theirs first! What should you do? Accept the offer? Take your property off the market and hope the buyer’s house sells? Or, do you reject the offer believing that if the buyer’s house sells they will surely still be interested in buying your home for the same price and terms of their original offer? 

The first thing is not to panic. Your buyer has made a “contingency offer”. Realtors are well familiar with these types of offers and they are not uncommon in this or any other market. A contingency offer is simply an offer that depends upon one or more things happening before the sale can be completed. In this case, the buyer must close on their existing home and receive their funds before they can close on their new home. If they do not close on their existing home by a certain date, then the buyer is released from the contract, they receive their deposit back, and the property is put back on the market.

Whether or not you should accept a contingency offer that is subject to the sale of the buyer’s existing home depends upon many factors. Some questions that need to be answered are: is the buyer’s home currently on the market for sale? Is the home listed with a Realtor, or is the seller trying to market their own property? How long has the property been listed for sale and is the price realistic for this market? Perhaps there is already a contract on the buyer’s home. If so, what are the terms? Is the buyer’s contract contingent on anything? How much time will your property be “off the market” before you know if the sale will go through; and, if the buyer’s home doesn’t sell by the specified date, will it be a better or worse time to have your property back on the market?

By asking the right questions, and talking out all of the pros and cons with your Realtor, sellers can easily make an informed decision about contingency contracts that involve the sale of the buyer’s home. Under certain circumstances, contingency contracts are a good bet for the seller but as with all other things, not always.