An offer has arrived that depends on the buyer selling their own house first. It is at your asking price, they seem serious, and your agent has mentioned something called a kick-out clause. Whether that offer is worth taking depends almost entirely on facts you have not asked for yet.
This article covers what a home sale contingency actually commits you to, the questions that separate a real one from a hopeful one, how a kick-out clause works, and when to say no.
We buy houses, so read the last section knowing that. We are not attorneys. Contingency and kick-out terms are contract wording rather than law, they vary, and the detail decides what you can actually do. Have your agent walk you through the specific clauses, and take anything unusual to an Oklahoma attorney.
What you are agreeing to
A home sale contingency means the buyer's obligation to complete depends on them selling another property. If that sale does not happen, they can generally walk away with their deposit.
So you are doing two things at once: taking your house off the market, and taking on somebody else's transaction risk in a house you have never seen, in a market you may not know, with a buyer you will never meet.
You are not waiting for your buyer. You are waiting for your buyer's buyer, and possibly for theirs.
That is why the questions below are about the other property rather than about your own.
The questions that decide it
Ask these before anybody discusses price, because the answers change what the offer is worth far more than the number does.
- Is their house on the market yet? If the answer is no, this is not a contingent offer, it is an intention. There is a large difference between a property under contract and one that has not been photographed
- Is it under contract, and at what stage? Under contract with the inspection period passed and finance approved is a genuinely different proposition from listed last week
- What is it, where, and at what price? You can form your own view of how saleable it is. A well-priced house in a moving market is one thing; an unusual property in a slow one is another
- How long has it been listed, and has the price moved? Two reductions already tells you something
- Is their buyer also contingent? Chains exist here as everywhere, and every link is another way for it to fail
- What is their finance position if their sale completes as planned, and what if it does not
- What is the deadline, and what happens when it passes
A buyer who answers all seven readily is a serious buyer. One who is vague about their own property is telling you something.
How a kick-out clause works
A kick-out clause is the mechanism that makes a contingent offer tolerable, and it is worth understanding precisely rather than roughly.
It lets you continue marketing the property while under contract. If another acceptable offer arrives, you notify the contingent buyer, and they have a defined period to remove their contingency and proceed, or to release the contract so you can take the new offer.
The details that decide whether it is any use to you:
- How long is the notice period? Shorter is better for you. A long window means the second buyer waits, and second buyers do not always wait
- What counts as an acceptable offer sufficient to trigger it. Vague wording here produces an argument at the worst moment
- What must the buyer do to remove the contingency? Simply saying they will proceed is weaker than demonstrating they can. Look for proof of funds or a bridging arrangement rather than an assurance
- How is notice given, and when does the clock start
- What happens to the deposits in each outcome
Without a kick-out clause you have simply taken your house off the market on the strength of a transaction you do not control. That is the whole point of the mechanism.
The price question
A contingent offer at full price is not a full price offer. It is a full price offer multiplied by the probability that the other sale completes, minus what the delay costs you.
Our holding cost calculator handles the second part. The first is a judgement, and the seven questions above are how you make it.
Two things follow. A contingent offer should generally be better than a clean one, not equal to it, because you are carrying risk. And a contingent offer at a small premium over a clean offer is frequently worse than the clean offer.
Our article on seller concessions covers another place where the headline number and the real number differ, and our page on how cash offers are calculated covers reading an offer as a net figure rather than a headline.
When to say no
When their house is not yet listed. Ask them to come back when it is under contract. That is not rude, it is the correct answer.
When you cannot get a kick-out clause on terms that let you continue marketing meaningfully.
When you have a deadline of your own. A contingency and a hard date are a poor combination, and our page on how fast you can close covers what the timetable actually looks like.
When the chain runs more than one link deep and nobody can tell you where it ends.
When the answers are vague. A serious buyer knows their own position.
Where we come in
A contingent offer with a real kick-out clause, from a buyer whose own house is under contract, is frequently a perfectly good deal. Take it, keep marketing, and let the mechanism do its work. That will net you more than we will pay and it is the usual right answer.
Where we become relevant: you have a deadline the chain cannot meet, a contingent deal has already collapsed and taken weeks with it, or you are on the other side of this and need to buy before you can sell. That last one is worth saying out loud, because occasionally the person who needs certainty is you, and a cash sale on your own house is what removes the contingency from your offer on the next one.
Our page comparing a cash offer against listing with an agent has the arithmetic. On a sound house with time available it usually favours the listing.
The short version
- A home sale contingency means you are waiting for your buyer's buyer, in a house you have never seen
- If their house is not yet listed, it is an intention rather than an offer. Ask them to come back when it is under contract
- Ask the seven questions about their property before discussing price
- A kick-out clause lets you keep marketing and gives the buyer a defined period to remove the contingency or release
- Check the notice period, what triggers it, what the buyer must actually demonstrate, and what happens to deposits
- Without a kick-out you have taken your house off the market on a transaction you do not control
- A contingent offer should be better than a clean one, not equal to it
- Vague answers about their own property are the answer
Frequently asked questions
What is a home sale contingency?
The buyer's obligation to complete depends on them selling another property. If that sale does not happen, they can generally walk away with their deposit.
What am I really taking on?
Somebody else's transaction risk, in a house you have never seen, in a market you may not know, with a buyer you will never meet.
What is the first question to ask?
Whether their house is on the market yet. If it is not, this is an intention rather than an offer.
What else should I ask?
Whether it is under contract and at what stage, what and where it is and at what price, how long it has been listed, whether their buyer is also contingent, their finance position, and the deadline.
What if they are vague about their own property?
That is your answer. A serious buyer knows their own position and answers readily.
What is a kick-out clause?
It lets you keep marketing while under contract. If another acceptable offer arrives, the contingent buyer has a defined period to remove their contingency or release the contract.
What should I check in the kick-out wording?
The length of the notice period, what counts as an acceptable offer to trigger it, what the buyer must actually demonstrate to remove the contingency, how notice is given, and what happens to deposits.
Why does the notice period length matter?
Because a long window means your second buyer waits, and second buyers do not always wait.
What should removing the contingency require?
More than an assurance. Proof of funds or a bridging arrangement demonstrates they can proceed; saying they will proceed does not.
What if I cannot get a kick-out clause?
Then you have simply taken your house off the market on the strength of a transaction you do not control. That is usually a reason to decline.
Is a contingent offer at full price a full price offer?
No. It is a full price offer multiplied by the probability the other sale completes, minus what the delay costs you.
Should a contingent offer be higher than a clean one?
Generally yes, because you are carrying risk. A contingent offer at a small premium over a clean one is frequently worse than the clean one.
What is a chain?
Where their buyer is also contingent on selling, and so on. Every link is another way for it to fail, and depth beyond one link is hard to justify.
Can I keep showing the house?
With a kick-out clause, yes, and that is the point of it. Without one, generally not in any meaningful way.
What if I have my own deadline?
A contingency and a hard date are a poor combination. Look carefully at whether the timetable can work before accepting.
What happens to my days on market?
You are under contract, but if it collapses you return to market having been under contract, which buyers read as a signal.
Is a contingent offer ever a good deal?
Frequently, when the buyer's house is already under contract past its inspection period and you have a real kick-out clause.
What if I am the one who needs to buy first?
Then you are on the other side of this, and a cash sale on your own house is what removes the contingency from your offer on the next one. That is a legitimate reason.
Should I ask for a larger deposit?
It is worth discussing with your agent. A buyer with more at stake behaves differently, though it does not change whether their own sale completes.
Can I accept a contingent offer and a backup?
That combination is common and sensible, and it is worth asking your agent to structure both.
Do you make contingent offers?
No. There is nothing for us to sell first, which is the whole difference. But if your house is sound and you have time, a listing usually nets you more.
What is the single most useful question?
Is their house under contract, and has the inspection period passed. That one answer tells you most of what you need.
We buy houses, so read the last section knowing that. We are not attorneys. Contingency and kick-out terms are contract wording rather than law, they vary, and the detail decides what you can actually do. Have your agent walk you through the specific clauses.