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Selling with a contingency

Dear Heather,

We have been trying to sell our house for several months, and we have just received a really good offer. However, the buyers want the contract to be contingent on the sale of their property. The real estate agent has indicated it is the type of property that will sell quickly. We don't know what to do. What do you think of this kind of contingency?


Dear Seller,

Contingencies based on the sale of the purchaser's current residence can be tricky. However, it is a fact of life which sellers sometimes have to accept if they want to sell their property. Few purchasers can afford to buy a new house while carrying the financial burden of their existing home.

A contingency is a legal concept which basically means that if a particular condition is not met, then the real estate contract becomes null and void. In a home sale contingency situation, if the buyer cannot sell his or her house, then the buyer does not have to go forward with the sales contract to buy the new property.

Clearly, such a contingency is in the best interest of the buyer, but not necessarily the seller. However, there are certain protections that a seller can put in place and incorporate into the sales contract.

One important provision is a time limitation. How long are you, as a seller, prepared to wait for them to sell their house? Generally speaking, these contingencies expire between 60 and 90 days from the time the contract is entered into. At the end of this time period, the contract can be declared null and void at the option of the seller.

On the one hand, you have to be realistic; you cannot put a short time restriction on the buyer because he or she may not be able to sell the home within that period of time. On the other hand, you do not want to leave it open-ended whereby the buyer, at any time in the future, can suddenly announce their house cannot be sold making the contract null and void. Thus, a range of between 60 and 90 days is a fair compromise between both of these positions.

A seller should also incorporate into the contract what is known as a “kick-out clause”. This will give them the opportunity to continue to market the property, and most real estate agents and brokers will be happy to assist in these efforts. If the seller obtains another satisfactory offer without any contingencies, the existing purchaser will be given a period of time in which to determine whether to cancel or go forward with the contract. The general rule of thumb is five to ten working days.

It is important to note that if the existing purchaser decides to go forward with the contract, they must demonstrate they have the financial ability to purchase even though their current residence hasn't yet been sold. If this language is not included in the sales contract, the purchaser could remove the contingency but nevertheless still not be able to get financing until the house is sold; obviously the settlement will not take place.

Regardless, sellers should also keep in mind that if an acceptable second offer is received they cannot accept it until they have given the five to ten-day notice to the first purchaser. By incorporating a kick-out clause, this permits the seller to continue to have their agent show and market the property, while at the same time preserving an interested purchaser who presumably will diligently attempt to sell his own house.

Real estate is not always the simple transaction you imagine it to be. Make sure you hire a reputable agent and conveyancing attorney who can guide you through the process.

•Heather Chilvers is among Coldwell Banker Bermuda Realty's leading sales representatives. She has been working in real estate for 27 years. If you have a question for Heather, please contact her at or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate

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Published May 16, 2017 at 9:00 am (Updated May 16, 2017 at 8:37 am)

Selling with a contingency

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