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A Contingency Sale Could Scuttle Your Home Buying Quest

You have heard of this before: the buyer will take possession of your home based on a contingency such as the successful sale and closing of their home. While this method of selling a home is common it is also fraught with potential problems including the last minute collapse of a real estate transaction. Do you want to risk doing business with a buyer whose purchase of your home is based on the sale of their home or would you prefer to do business with a buyer who has no contingency in place? Read on and we'll take a closer look at contingency sales and whether you should accept one.

It was an awful story but it is one that needs to be repeated as a warning to all home sellers. Friends of ours sold their home to an out of state buyer soon after placing their home on the market. The quick sale shocked them but they were ready for their move to live with a relative in another state. When the time came for the closing they learned that the out of state buyer was held up by the sale of their own home, therefore the closing would have to be pushed back by several days.

Several days later another call came in: the buyers were still being delayed and it looked as if that the other sale would not occur for at least two more weeks! Our friends decided to sign all of the paperwork and instruct their attorney to handle things so that they could make their move. A full month after arriving at their new out of state home, our friends finally closed the sale of their home to the buyer a full six weeks after it was supposed to happen.

This horror story could have gotten a lot worse had our friends planned on taking the proceeds of their home and putting the monies immediately into a new home. Fortunately, there out of state move involved a short term rental with a possible home purchase later. Needless to say, they were very inconvenienced by the delay, but they still receive full price for their home.

On the other hand, some buyers will reduce the price of their home to accommodate a cash customer or they will sell their home to someone who doesn't have a contingency sale. Only accept a lower price if you must sell and move right away, otherwise hold out for the full price, but watch out for a contingency sale.

If a sale is agreed upon with the stipulation saying, "subject to seller finding suitable housing" then this becomes leverage for you, the seller, and it could give you an out in the event you cannot find another home. In this case the contingency works for your benefit as opposed to the previously mentioned example which clearly works against the seller.