Buying a house contingent on selling yours means writing a home sale contingency into your purchase agreement so the new deal only goes through if your current home sells within an agreed window. If it doesn’t, the contract terminates and your earnest money comes back to you.1My Home by Freddie Mac. Understanding Contingency Clauses in Homebuying Most contingency periods run 30 to 60 days, and every term inside that window is negotiable.
How the Home Sale Contingency Works
The contingency is a condition in your purchase contract that ties closing on the new home to selling your existing one. Miss the deadline written into the contract and the agreement is canceled with your deposit refunded. The seller, meanwhile, keeps the right to market the property and collect backup offers while you work on your sale.
There are two flavors. A sale contingency applies when your current home isn’t yet under contract — you still need a buyer. A settlement contingency applies when your home is already under contract and you’re waiting for that deal to close. Sellers usually prefer the settlement version because there’s less that can go wrong.
The Kick-Out Clause
The kick-out clause is what makes the arrangement tolerable for the seller. It lets them keep showing the property, and if another buyer makes an offer they want to take, they send you a kick-out notice. From that moment you typically have 48 to 72 hours to do one of two things: remove the contingency and commit to buying regardless of whether your home sells, or walk away with your earnest money intact.
Removing the contingency means you need to prove you can close without the sale proceeds — savings, a bridge loan, or other financing lined up. Miss the response window and the contract terminates automatically and the seller moves on with the backup buyer.
What You Need Before Making the Offer
Sellers evaluate a contingent offer partly on how ready you look. Before you submit anything, put four pieces in place.
Get a comparative market analysis from your agent, or a formal appraisal, so you have a realistic listing price for your current home. That number drives your equity estimate and tells you how much cash you’ll actually have for the new purchase.
Get a mortgage pre-approval that accounts for the contingency. Your lender will look at whether you can qualify while still carrying your current mortgage or whether the first sale has to close before the new loan funds. Conventional loans generally cap debt-to-income around 45% to 50%.2Consumer Financial Protection Bureau. Get a Preapproval Letter
Calculate your net proceeds. That’s the cash left after paying off your existing mortgage, agent commissions (nationally around 5% to 6%), and closing costs. The new seller wants to see those proceeds cover your down payment and closing costs.
Get your current home listed, or commit to a firm listing date. A live listing signals you’re actually working the sale, not testing the market.
Making the Offer Attractive Enough to Accept
Most contingent offers use a standardized addendum, often called a Sale of Other Property Addendum or Settlement Contingency Addendum, attached to the purchase agreement. It sets the property address of the home you’re selling, the contingency deadline (usually 30 to 60 days from the accepted offer), the kick-out response window, and how closing on your sale aligns with closing on the new purchase.
Expect pushback. Sellers see contingent offers as riskier than clean ones, so you may need to compensate. Common moves: a higher purchase price, a larger earnest money deposit, a shorter contingency window, or flexible closing dates. The seller will almost always insist on keeping the kick-out clause and continuing to show the property.
In a competitive market, contingent offers are frequently passed over entirely in favor of non-contingent ones. If that’s the market you’re in, the financing alternatives below become the more realistic path.
Buying Before You Sell: Bridge Loans and HELOCs
Two financing tools let you make a clean, non-contingent offer by using your existing home’s equity for the new down payment.
Bridge Loans
A bridge loan is short-term financing, typically 6 to 24 months, secured by your current home’s equity. Payments are usually interest-only during the term, with the principal paid off when your existing home sells. Rates from private lenders generally run 9% to 14%, well above a conventional mortgage. The rate depends heavily on loan-to-value: borrowing 65% of your home’s value costs less than borrowing 80%.
Home Equity Line of Credit
A HELOC lets you borrow against your equity on a revolving basis and only pay interest on what you draw. Rates are typically lower than bridge loans, but approval takes longer, and lenders often want you to keep 15% to 20% equity remaining after the draw. A HELOC works best when you have significant equity and want flexible access rather than a lump sum.
Both routes make you a stronger buyer, but both also mean carrying additional debt on top of your existing mortgage until the current home sells. If that sale drags, so does the cost.
Coordinating Two Closings
Once your contingent offer is accepted, the practical work is aligning the two closings so proceeds from selling your current home fund the purchase of the new one. That takes constant communication between both agents, both title or escrow companies, and both lenders.
In a concurrent closing, your sale funds and records first, the proceeds wire to the escrow handling your new purchase, and the second transaction closes, sometimes the same day. Using the same title and escrow company for both can simplify things but isn’t required.
The tighter the gap, the more can go wrong: a delayed wire, a last-minute title issue on either property, a lender asking for one more document. Build in buffer time where you can. If the closings can’t happen the same day, plan for temporary housing or a rent-back agreement.
Protecting Your Earnest Money
Your earnest money deposit — typically 1% to 3% of the purchase price, sometimes more in competitive or luxury markets — is your financial stake in the deal. The contingency protects it, but only if you follow the contract’s terms and deadlines.
If your home doesn’t sell within the contingency period and you haven’t waived the contingency, the contract terminates and the deposit is refunded.1My Home by Freddie Mac. Understanding Contingency Clauses in Homebuying That’s the clause working as designed. You can still lose the deposit in a few situations:
- Letting a contingency deadline pass without invoking it or requesting an extension, which can put you in default.
- Waiving the contingency (voluntarily or in response to a kick-out notice) and then failing to close. Once waived, you’ve committed to buying regardless of your home’s sale, and the seller can keep the deposit as damages.
- Breaching other provisions of the purchase agreement, even with the contingency intact.
A buyer who defaults after waiving a contingency may also face a lawsuit for additional damages, such as the gap between your price and what the seller eventually receives from another buyer. Available remedies depend on state law and your contract language. Talk with a real estate attorney before waiving any contingency.
Tax on the Sale of Your Current Home
Selling your current home may create a federal tax bill depending on your profit. Under Internal Revenue Code Section 121, you can exclude up to $250,000 in capital gains from the sale of a primary residence if you’re single, or up to $500,000 if you’re married filing jointly. To qualify, you generally must have owned and used the home as your primary residence for at least two of the five years before the sale.3Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
Gain above the exclusion is taxed at the federal long-term capital gains rate of 0%, 15%, or 20% depending on your taxable income. You need to report the sale on your federal return if you receive a Form 1099-S at closing or if your gain exceeds the exclusion, using Schedule D (Form 1040) and Form 8949.4Internal Revenue Service. Topic No. 701, Sale of Your Home Even if the full gain is excludable, a 1099-S means you still report it. Fold any potential tax into your net proceeds before committing to the new purchase.
When the Dates Don’t Line Up
If the two closings can’t be scheduled to match, a post-closing occupancy agreement — often called a rent-back — lets one party stay in the property after closing. You might need one from the seller of your new home, or you might need to offer one to the buyer of your current home so you have time to close on the next place.
These agreements typically last 30 to 60 days and should nail down several terms:
- Daily or monthly rent, often based on the new owner’s daily carrying cost (principal, interest, taxes, insurance) or the local rental rate.
- A security deposit, usually at least one month’s rent, held in escrow until move-out and inspection.
- Who pays utilities and handles routine upkeep during the stay (typically the occupant).
- A firm move-out date with daily penalties for overstaying.
- Insurance: the new owner keeps homeowner’s coverage; the occupant may need renter’s insurance.
Some lenders and loan programs limit how long a rent-back can last, particularly when the buyer’s loan requires owner occupancy within a set timeframe. Fannie Mae guidelines, for instance, require borrowers to meet the occupancy terms in their loan documents. Confirm with your lender before agreeing to any rent-back so it doesn’t put you in violation of your mortgage.