The decision to sell your current home and purchase a new one—a process known as relocation—is often exciting, but it’s frequently shadowed by a major fear: What if I sell my house and can’t find a new one, leaving me homeless?
This common anxiety, if not addressed through proper planning, can lead to costly mistakes.
In fact, handling the process incorrectly can result in losses of tens of thousands of dollars.
The key to mitigating this risk and retaining control throughout the transaction lies in understanding and strategically utilizing contingencies.
How Contingencies Protect Your Relocation
Many sellers make the mistake of finding a replacement home and negotiating a purchase before their current property is even on the market.
This puts you at a significant disadvantage, often costing you money on both the sale and the purchase.
The correct, financially protective strategy is to start by listing your current home first.
Consult a Specialist: Meet with a real estate professional who specializes in relocation.
These transactions have many moving parts, and an expert is essential for coordinating them properly.
Evaluate and List: Go through the standard process of property evaluation, pricing, and listing your home for sale.
Find a Solid Buyer: Work with your agent to attract and screen offers from a solid, committed buyer who is financially and psychologically prepared to close the deal.
Contingency 1: Protecting the Sale of Your Current Home
Once you have accepted an offer on your current home, your agent will negotiate a crucial term into the contract: a contingency on finding a replacement property.
How It Works: This clause commits the buyer to purchase your home while simultaneously giving you, the seller, a specific amount of time (the contingency period) to find and secure your next residence.
Your Protection: If, within that negotiated time frame, you are unable to find a suitable replacement home, you have the contractual right to cancel the escrow and return the buyer’s deposit.
This ensures you are never forced to sell your home without a secure place to move, effectively eliminating the fear of being homeless.
Contingency 2: Protecting the Purchase of Your New Home
Now that you have a committed buyer for your old home, you can confidently search for and make an offer on your replacement property.
When submitting your purchase offer, it will include a second vital clause: a contingency on the close of escrow for your existing home.
How It Works: This tells the seller of the new property that your offer is contingent upon your ability to successfully close the sale of your current home.
Your Protection: This contingency protects your earnest money deposit on the new purchase.
If the sale of your current home unexpectedly falls through, you can cancel the contract on the new property without losing your deposit.
The Critical Role of Timelines: Avoiding Double Liability
Managing the timelines of both escrows is the most delicate part of the process, and this is where an expert agent is irreplaceable.
The buyer of the home you are selling typically has their own contingencies (inspection, financing, etc.), which usually last around three weeks (17 to 21 days).
They can cancel during this period and get their deposit back, leaving you in limbo.
The Golden Rule: You must ensure the buyer of your current home removes all of their contingencies before you remove the contingency on the purchase of your replacement property.
The Risk of Messing Up: If you prematurely remove the contingency on your new purchase—committing to buy—and your original buyer then cancels their deal, you are left with two problems:
You must return the deposit to your original buyer, and you become legally liable to purchase the replacement home, risking the loss of your second deposit.
A knowledgeable relocation specialist is essential to navigate these staggered timelines, ensuring that every risk is mitigated and that you remain protected on both ends of the transaction.
By understanding and controlling these contingencies, you maintain control over your relocation and keep as much money as possible in your pocket for your next home.