How to Buy a House Contingent on Selling Yours

Important Points to Note:

• A home sale contingency offers financial protection as it prevents you from carrying two mortgages simultaneously and allows you to use your home equity for your new purchase.
• It may weaken your offer in competitive markets where sellers prefer non-contingent buyers or include a kick-out clause.
• Preparation increases your chances, and early listing, strategic pricing, and pre-approval can enhance your position when buying and selling a house simultaneously.

If you’re considering how to buy a house contingent on selling yours, you’re likely looking to coordinate two significant moves at once. Perhaps you’ve identified your dream home in Austin, TX, but need to sell your house in Phoenix first. In such scenarios, many homeowners opt to buy a house contingent on selling their current home, which involves adding a home sale contingency to the purchase agreement. This means your offer depends on your current home selling by a specific date, facilitating the process of buying and selling a house concurrently.

Whether you’re currently contingent on selling your house or contemplating submitting a contingent offer on a home sale, it’s crucial to comprehend how this strategy functions before proceeding. From contract timelines to seller considerations and financial aspects, there are numerous factors involved. We’ll delve into each of these aspects in more detail below to help you determine if buying a house contingent on selling yours is the right decision.

Understanding the Home Sale Contingency

A home sale contingency is a clause in your purchase contract that makes buying a new home dependent on selling your current one. If you’re aiming to buy a house contingent on selling your home, this clause ensures that the transaction progresses only if your current property sells or enters a contract within a specified timeframe. Failure to do so usually allows the agreement to be canceled without penalties, subject to the contract terms.

Reasons for using it: Many homeowners opt for a home sale contingency when buying and selling a house concurrently. It helps them avoid handling two mortgages and reduces the financial burden of purchasing a new home before selling the current one. This approach also enables them to utilize the equity in their existing property for a down payment, facilitating financing qualification when making an offer contingent on selling their home.

Typical timeframe: When purchasing a house with a sale contingency, the contingency period typically ranges from 30 to 60 days, although timelines vary based on negotiations and local market conditions. This duration allows time to list your home, secure a buyer, and complete the sale. If you’re contingent on selling your house and fail to do so before the deadline, the contract usually expires. In many instances, depending on how the contingency is structured, you may withdraw without losing your earnest money deposit.

Kick-out clauses: Sellers may incorporate a kick-out clause in a contingent offer on a home sale. This provision allows them to continue marketing the property and accept another offer while your home sale contingency is in effect. If a new buyer presents a compelling offer, you’re typically given a short period (usually 24–72 hours, depending on the contract) to remove the contingency and proceed, or the seller can cancel the agreement. These clauses safeguard sellers, particularly in competitive markets, although terms vary by contract and state regulations.

5 Steps to Buying a Home Contingent on Selling Yours

Purchasing a home while selling your current one requires coordination. While each situation is unique, there are several key steps most buyers follow when utilizing a home sale contingency.

Step 1: List Your Current Home

Most buyers begin by listing their current property on the market before submitting an offer. If you’re serious about buying and selling a house concurrently, having your home actively listed and strategically priced demonstrates credibility to sellers.

A competitively priced home generating showings makes a contingent offer on a home sale much more appealing. Sellers seek assurance that your property will sell within the contingency timeframe.

Step 2: Include a Home Sale Contingency in Your Offer

When you’re prepared to proceed with a new home purchase, your agent will draft the offer with a real estate sale contingency clause included in the purchase agreement. This clause specifies that your offer is contingent on selling your home and outlines the deadline for your property to enter a contract or close.

The agreement will detail:

• The contingency timeframe (typically 30–60 days)
• Criteria for a successful sale
• Consequences if the deadline is not met

Clear terms reduce ambiguity and protect both parties.

Step 3: Seller Review

If the seller accepts your offer, the home goes under contract with your home sale contingency intact. However, in competitive markets, sellers often introduce a kick-out clause.

This clause allows the seller to continue advertising the property. If a stronger offer emerges, you may have a brief period (typically 48–72 hours) to remove your contingency and proceed without it, or the seller can terminate the contract.

Kick-out clauses balance risk between buyer and seller when purchasing a house with a sale contingency.

Step 4: Sale Completion and Progression

If your current home sells and closes within the agreed timeframe, the contingency is fulfilled. At that point, your purchase proceeds similar to a standard transaction.

You’ll undergo:

• Home inspection
• Appraisal
• Final mortgage underwriting
• Closing arrangements

Successfully aligning timelines enables you to sell and buy a house concurrently, minimizing overlap and financial strain.

Step 5: Contract Termination if Home Doesn’t Sell

If your property doesn’t sell within the contingency period, the purchase agreement is typically canceled. In most cases, buyers can withdraw without forfeiting their earnest money deposit, subject to the contract terms, as the contractual condition was not met. The seller can then relist or entertain another offer.

Alternatives if a Home Sale Contingency Isn’t Feasible

• Bridge Loan: A short-term loan allowing you to purchase your new home before selling your current one. It provides temporary financing but often comes with higher interest rates. Discuss the costs and terms with a lender, as these loans typically carry higher interest rates.
• HELOC (Home Equity Line of Credit): Borrow against the equity in your current home to fund the down payment on your next property. This incurs debt until your home sells, so review the terms carefully with a financial advisor or lender.
• Rent-Back Agreement: Sell your house but negotiate with the buyer to remain in it for a specified period while you finalize your new home purchase. This reduces pressure but necessitates buyer approval.
• Sell First, Rent Short-Term: Avoids a contingency altogether, but often entails moving twice and covering storage or rental expenses in between.
• Trade-In or Buy Before You Sell Programs: Some companies and lenders offer services that unlock your home equity upfront or make a cash offer on your behalf, allowing you to purchase first and sell later.

Real-Life Example: How a Home Sale Contingency Works in Practice

This scenario illustrates how a home sale contingency can facilitate your transition between homes without managing two mortgages simultaneously, provided your timeline stays on track.

Let’s assume you’re selling a $400,000 home in Phoenix, AZ, and aiming to purchase a $500,000 home in Austin, TX.

1. You list your Phoenix home at $400K and receive an offer two weeks later.
2. Once your Phoenix home is under contract, you make an offer on the Austin home with a home sale contingency clause.
3. The Austin seller accepts your contingent offer but imposes a 45-day deadline for your sale to close.
4. Your Phoenix home sale concludes within that timeframe – freeing up equity for your down payment.
5. Once the funds are available, your Austin purchase progresses smoothly towards closing.

Tips for Strengthening Your Home Sale Contingency Offer

• Get pre-approved for your next mortgage: A pre-approval letter demonstrates to sellers your financial readiness, even with a contingent offer based on selling another home.
• Realistically price your current home: Setting an appropriate listing price accelerates the sale of your home, reassuring sellers that your contingency won’t cause significant delays.
• List your current home before making an offer: Having your property already on the market, or better yet, under contract, enhances the credibility of your offer.
• Shorten the contingency period if feasible: A 30-day window instead of 60 can significantly improve the attractiveness of your offer.
• Offer more earnest money or a higher price: Providing financial incentives demonstrates to sellers your commitment to closing once your home sells.
• Be transparent with sellers: Keep them informed about your progress and provide updates. Sharing that your home is already listed or under contract builds trust and enhances your acceptance chances.

Buying with vs. Without a Home Sale Contingency

Here’s a comparison of purchasing a new home with a contingency versus buying without one.