Selling Your Home While Buying Another in WNY: What to Put in Your Sale Contingency Clause

When selling your home in Western New York (WNY) and buying another, one of the most important clauses you can include in your purchase contract is the sale contingency clause. This clause serves as a safeguard in situations where you’re unable to sell your current home before closing on a new one. Real estate transactions can be complicated, and in a competitive market like WNY, having the right provisions in place is essential to avoid financial stress and confusion. This post will explain the key elements of the sale contingency clause, how it works in WNY’s market, and the steps you can take to protect yourself during this process.

What is a Sale Contingency Clause?

A sale contingency clause is a provision added to a purchase contract, making the sale of the new property contingent on the successful sale of your current home. In essence, the clause gives you the flexibility to back out of the transaction if you can’t sell your existing property within a certain time frame. Without this clause, you could find yourself legally bound to purchase a new home, even if your current property hasn’t sold yet, leaving you with two mortgages to pay. This can be a significant financial burden and is a risk that most buyers don’t want to take.

In addition to protecting the buyer, this clause also provides transparency for the seller of the new property. It allows them to understand that the sale hinges on the buyer selling their existing home, which can provide both parties with clarity on the transaction timeline.

Why Is a Sale Contingency Clause Important in WNY’s Real Estate Market?

Western New York’s real estate market can be competitive, with many buyers vying for a limited supply of homes. Whether you’re purchasing a home in Buffalo, Niagara Falls, or Batavia, the competition can make it harder to secure the property of your choice without the proper legal safeguards in place. For those buying and selling simultaneously, a sale contingency clause is particularly crucial.

In WNY, there are fluctuations in home availability, especially in desirable areas. During peak seasons, such as spring and summer, demand can outstrip supply, making it even harder to find a home that fits your needs. A sale contingency clause can give you the peace of mind you need to navigate this market and make a competitive offer while ensuring that you’re not left with the burden of owning two properties.

Key Elements of a Sale Contingency Clause

Including a sale contingency clause is important, but the structure of the clause is equally crucial. Here are some key elements that should be in place to protect your interests and ensure that your real estate transaction goes smoothly:

1. Clear Timeframes

Time is of the essence in any real estate transaction, and this is especially true when the purchase of a new home is contingent on the sale of another. A sale contingency clause should specify a clear deadline for the sale of your current home. Typically, this period is around 30 to 60 days, but it can be extended depending on the nature of the real estate market at the time.

This time frame allows both the buyer and seller to understand the schedule for closing. For instance, if your home is under contract but hasn’t yet sold, the seller of your new home will know when to expect a decision, and whether you’re able to proceed with the purchase or need more time.

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2. The Right to Extend the Contingency Period

The right to extend the contingency period is another critical factor in the clause. Selling a home doesn’t always happen according to plan, and having an extension built into the sale contingency clause can offer more flexibility. If your current home takes longer to sell than anticipated, an extension allows you to continue with the purchase of your new home without the risk of losing it.

Negotiating this right is essential, especially in a competitive market. It gives you more time to finalize the sale of your current home, which can be crucial in an unpredictable market.

3. Kick-Out Clause

In competitive real estate markets like WNY, sellers may be hesitant to accept offers with a sale contingency, fearing that the buyer won’t be able to sell their current home. A kick-out clause can help mitigate this concern by allowing the seller to continue marketing the property and accept a backup offer.

The clause ensures that the seller is not stuck waiting indefinitely for your home to sell. However, it also provides you with an opportunity to proceed with your purchase if you manage to sell your home within a certain time frame, or if you can’t complete the sale for any reason.

4. Pricing Adjustments in the Contingency Clause

The price of homes can fluctuate depending on market conditions, which is why it’s important to build in provisions for pricing adjustments within your sale contingency clause. If market conditions change during the sale process—for example, if the market shifts from a buyer’s market to a seller’s market—you may be able to negotiate the price of the new home.

Having this provision ensures that you are not locked into a price that may no longer reflect the current market value, which can be critical if your current home sale is delayed and the housing market undergoes changes.

Negotiating the Sale Contingency Clause

Negotiating a sale contingency clause can be tricky, especially in a competitive market. Sellers may not want to accept an offer with this kind of clause because it introduces uncertainty into the transaction. However, with the help of an experienced real estate attorney or agent, you can structure the clause in a way that is both fair and reasonable for both parties.

Key strategies for negotiating this clause include offering a strong earnest money deposit to demonstrate your commitment to the purchase, or agreeing to shorten the contingency period. Working closely with your attorney will help you navigate these negotiations and ensure that your interests are protected.

What Happens if Your Home Doesn’t Sell in Time?

One of the main risks of including a sale contingency clause is that your current home may not sell in time, causing you to lose the opportunity to purchase the new property. However, this doesn’t mean that all is lost. The contingency clause typically allows for several outcomes, such as:

• Extending the contingency period to allow more time for the sale.
• Back-up offers may allow you to secure the new home in case your sale falls through.
• Finding alternative financing options, such as a bridge loan or rent-back agreement, can provide you with the financial flexibility to go ahead with the purchase.

By including specific time frames and options for extension, you can reduce the risk of being caught in an unfortunate situation.

Alternatives to the Sale Contingency Clause

In some cases, sellers may not accept a sale contingency clause, or you may choose to remove it from the contract. Here are some alternatives:

1. Bridge Loans

A bridge loan allows you to use the equity in your current home to secure financing for your new home. This option provides you with the flexibility to buy a new home without waiting for your old home to sell. While a bridge loan can offer peace of mind, it can also come with higher interest rates, so it’s important to evaluate whether this is the right option for your financial situation.

2. Rent-Back Agreements

A rent-back agreement allows you to sell your current home but stay in the property as a renter for a specified period. This can give you extra time to close on your new home, giving you more flexibility in the buying process. It’s an excellent option if your current home has already sold but you need more time to finalize the purchase of your next home.

Closing Thoughts

Selling your home while buying another in WNY can be a daunting task, but with the right protections in place, you can move forward with confidence. A well-structured sale contingency clause is your best defense against the uncertainties of real estate transactions. Make sure to work with an experienced real estate attorney to ensure that your sale contingency clause covers all the bases and allows for a smooth and stress-free transition from your old home to your new one.

For more help with crafting your sale contingency clause or for guidance through the home buying and selling process, contact Cole, Sorrentino, Hurley, Hewner & Gambino, P.C. today. Our team of experienced attorneys is here to assist you every step of the way.

To learn more about this subject click here: Five Things To Consider Before Selling a House: Tips from a Real Estate Attorney