Home Sellers May Want to Turn Down an Offer if It Includes This Term

Getting an offer for someone to buy your house is exciting -- but it has to be a good offer. Otherwise, you could end up regretting moving forward with your home sale since the bad offer could have a negative impact on your personal finances.

When it comes to reviewing an offer, obviously you want to take a look at the price being offered. But you'll also need to pay attention to contingencies, which are pre-conditions that must be met before the home buyer is required to go through with the purchase.

Some contingencies can be a pain, but are common and expected in real estate contracts -- like inspection and appraisal clauses, which give buyers the right to walk away (or renegotiate the deal) if something goes wrong. But there are other contingencies that aren't necessarily found in every contract and that could cause a lot of hassle while also reducing the chances of the deal going through.

One term, in particular, could be especially problematic for sellers. If you receive an offer with a sale contingency in it, you may want to pass it up. Here's why it can be bad news.

Watch out for a sale contingency

One big red flag to watch out for when you get an offer is a sale contingency. Basically, this contract term specifies that the buyers want your house -- but won't be obligated to purchase it unless their own home sells.

There's a simple reason why sales contingencies could sometimes be included in real estate deals. In 2023, around 50% of home buyers were people who already owned properties, rather than first-time buyers. And this can make things tricky.

Someone who owns a home has a choice between selling it first and then scrambling to find a place to live after they've done so, or finding a new house first and then praying their home sells so they don't get stuck making two mortgage payments for months or even years.

Some home buyers don't like those choices, so they try to buy a new property conditioned on their old one selling. Usually, there's a specific timeframe. For example, they might specify that if their home sells by a certain date in the future -- often several months away -- then they will buy your home at the agreed-upon price. But if their home doesn't sell, they won't be obligated to move forward with a mortgage lender to buy your property.

Unfortunately, when this clause is included, it may set you up for failure.

What could go wrong?

Typically, when you accept an offer with a sale contingency, you have to list your house as "Pending," rather than "For Sale." People don't go look at pending houses for the most part, so it's likely you'll lose your chance at any other potential buyers seeing your property. You'll be stuck waiting and hoping that the current buyers are able to sell their property and move forward.

The problem is, that may not happen. You won't really know what price your buyers are trying to get for their current home, how aggressively they are marketing it, how they're maintaining it, or whether there's even a realistic chance of them selling on schedule. And you'll just have to sit there hoping they find a qualified buyer, because if not, you'll lose your sale and all the time you spent waiting for it.

There's simply too much uncertainty when your sale relies on someone else doing a business deal. It might not be worth taking the risk of having your house sit there for months, only to end up back on the market if something falls through.

Unless you're OK with needing to start the selling process over again after potentially months of waiting for your buyers to close the deal, you should not agree to an offer with a sale contingency. Instead, wait for a buyer who is ready, willing, and able to move forward on a schedule that makes sense so you can forge ahead with moving out of your home.