What is a Real Estate Contingency? (And How to Buy & Sell at the Same Time)

What is a contingency, and why should you even care?

Hey everyone, it's Jennie Wolek with The Wolek Group here at Keller Williams Realty in Tulsa, Oklahoma. Real estate contingencies are becoming a bit more popular these days. As the local market shifts and days on market creep up slightly, we are seeing buyers gain a little bit more negotiating power.

If you need to sell your current house before you can buy your next one, here is everything you need to know about contingencies.

What is a Contingency?

By definition, a contingency means that a buyer makes an offer on a new property that is strictly contingent on their current home selling first.

Why is this valuable? It protects the buyer from the financial risk of carrying two mortgages and owning two homes at the exact same time.

How a Contingency Works for Sellers

If you are a seller, accepting a contingent offer isn't necessarily a bad thing! It secures a contract with a buyer who really wants your home.

The good news is that you get to keep your home on the market. It will be marked as "contingent" on the MLS, but you can still receive showings and even accept a secondary offer.

If you receive a better second offer, we utilize something called a "Kick Out Clause." This allows the seller to give written notice to the first buyer that they have received another acceptable offer. The first buyer then has a specific number of days to either remove their contingency and move forward with the purchase, or back out (and receive their earnest money back).

The Strongest Offer Strategy

While our contracts allow for contingencies, they still aren't the strongest offers you can make.

When we advise our buying clients, we tell them that the most powerful offer they can make is to already have their current home on the market and under contract. This proves to the seller that you are actually able to move forward and close in 35 to 45 days, rather than rolling the dice on whether your home will eventually sell.

My Personal Strategy: The Temporary Rental

Whatever you can do to set yourself up for a stronger offer, you should do it.

For example, when my family knew we wanted to move to a different part of town, we actually found a rental in that area. We sold our existing home, put the money in the bank, and rented for a year. This completely removed the stress of waiting for one transaction to happen before the other. When our next home came on the market, we were completely ready to go!

If you are able to go that route, I highly encourage it. But if not, that's okay! We have the systems in place to guide you through the process of buying and selling at the exact same time while making sure you do not end up homeless.