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A home sale contingency protects buyers who want to sell one home before purchasing another.

A sale and settlement contingency is dependent upon the buyer selling and settling their current home. Sellers can continue to market their available home with the stipulation that the buyer will get the opportunity to remove the contingency within a set time period – typically 24-to-48 hours – if the seller receives another offer. If the buyer cannot remove it, the contract is terminated, and the seller can accept the other offer.

A settlement contingency is used if the buyer already has a contract in hand on his property, and a settlement date scheduled. Since the property isn’t sold until the closing, this protects the buyer if the sale falls through. Usually, the seller can’t accept other offers during the time set in the contingency. If the buyer’s home does not close by the set date, the contract is terminated.

Most buyers need to sell their existing home to buy a new one, especially a more expensive house. A home sale contingency gives them time to sell and settle before committing to a new home.

A home sale contingency can be risky for sellers, however, because the buyer’s home may not sell, or the seller’s house becomes more difficult to sell because it’s listed “under contract.” Sellers should ask if their potential buyer’s home is on the market and for how long, if it’s correctly listed, and how long other available homes in its neighborhood have been for sale.

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