Real Estate February 28, 2024

Home Sale Contingencies

We’re tackling a topic today that is just as confusing as it is important.
Home. Sale. Contingencies.
When I think of the word “contingency” I replace it in my mind with “so long as.” For example, an inspection contingency means that the offer stands so long as the inspection is acceptable.
Therefore, a home sale contingency is when the buyer wants to buy a house so long as they can sell their current home first. The buyer can’t get preapproved for a new mortgage until their old one is off the books.
A lot of buyers are in this position right now trying to navigate a market that’s already not-so buyer friendly. It takes a little finesse to get a seller to consider a home sale contingency, but it can be done.
Remember how confusing I said this topic was? It’s so confusing that most agents won’t even talk about the 3 ½ types of home sale contingencies. (Hold your horses, I’ll explain the “half” soon.) Most Realtors stick to the simplest one – the one that’s the easiest to understand. That is the only one they educate their clients on because it’s the only one that they, themselves, took time to learn.
SSP: Sale & Settlement of Other Property
The most common type is called an SSP which stands for Sale & Settlement of Other Property.
Let’s say that we have a completely fictitious couple named John & Kate. They live in a cute 2 bedroom ranch – their perfect starter home that they purchased 5 years ago when they got married. All of a sudden, Kate finds out that she’s pregnant… WITH OCTUPLETS! (wouldn’t that be wild if this was a real story?!) 😉
John & Kate need to find a bigger house asap! They find a ginormous 3-story mansion owned by Mr. & Mrs. Arizona. The Arizona’s are a recently retired couple who would like to spend their golden years in their Pheonix vacation home full time. The mansion is perfect for John, Kate & their 8 babies that will soon be on their way.
John & Kate make a full-price offer to Mr. & Mrs. Arizona with the stipulation that they need to sell their ranch home first so that they can use the proceeds for their down payment on the mansion. They make an offer with an SSP (Sale & Settlement of Other Property.) If the Arizona’s agree, they will take the mansion off the market & give John & Kate a specific amount of time (30 days, for example) to get a buyer for their ranch home.
That is a very watered-down version of an SSP – Sale & Settlement of Other Property.
As you can tell by the story, this type of contingency is very buyer friendly. John & Kate have a good amount of time to find a buyer for their small ranch without any worries that another buyer is going to come along & outbid them on the mansion. This type of home sale contingency commits the Arizona’s to selling their mansion to John & Kate as soon as they have a buyer for the ranch.
SOP: Settlement of Other Property
Remember how I said that there’s 3 ½ types of home sale contingencies? Here’s where the half comes in. As soon as John & Kate have an accepted offer on their ranch, the SSP (Sale and Settlement of Other Property) changes to an SOP (Settlement of Other Property.)
The SOP means that John & Kate already have an accepted sales agreement on their ranch, & they no longer need to sell the home, they just need to have the closing on the property to be able to finalize the mansion purchase.
Some buyers don’t start house-hunting until they have an offer on their current house so that they can make an offer on the new home they start out with just the SOP – just needing to close on their home because they already have a buyer. This is why I call the SOP the “half” home sale contingency. The buyers have already secured an offer on their home, & they just need to close, so they’re halfway there.
SSP-TKO: Sale & Settlement of Other Property with a Timed Kick-Out Clause
The second type of home sale contingency is the one that I personally feel is the most fair for these types of situations. It’s called an SSP-TKO (Sale & Settlement of Other Property with a Timed Kick-Out Clause.)
It’s the same deal – John & Kate need to find a buyer for their ranch & need to settle that first before they can close on the mansion. However, in this instance, the Arizonas don’t want to take their home off the market. They don’t know how quickly John & Kate are going to be able to find a buyer, they really don’t want to miss out on another buyer passing their mansion over.
That’s where the TKO (Timed Kick-Out Clause) comes in. The Arizonas keep marking their mansion to other buyers, & at the same time John & Kate are trying to sell their ranch. As soon as John & Kate get a buyer, then the Arizonas will stop marketing the mansion & commit to John & Kate.
However, if someone else is interested in the mansion, the Arizonas essentially have to give “first dibs” to John & Kate.
It just so happens, in this example that there’s another family that wants to move to town -the Bradys. Mr. & Mrs. Brady just got married. Mrs. Brady has 3 very lovely girls, & Mr. Brady is busy with 3 boys of his own, so this blended family is definitely in need of more space.
They see the Arizona’s mansion & love it! They decide to also make a full price offer but do not have a home sale contingency.
The Arizonas would LOVE to accept this offer, get to the closing table as quickly as possible & head off to Pheonix. They, however, signed an SSP-TKO with John & Kate. With the timed kick-out clause, they agreed that they would go to John & Kate first & to tell them that they have another offer. The Arizonas would give John & Kate 48 hours, for example, to either find a buyer for their ranch or find another way to financially proceed with the purchase of the mansion without having to sell the ranch home.
At this point, John & Kate are frantic, they reduce the price on their ranch in hopes of attracting more buyers, they have their Realtor run an emergency open house & they call up Kate’s rich uncles, Bert & Ernie, to see if they would lend them a huge chunk of change so that they can buy the mansion with cash.
Bert & Ernie love Kate but not enough to lend her that much money, so that option is out. They only got nosy neighbors at the open house & no offers at the end of their 48-hour timeframe. So, their offer can now be officially terminated by the Arizonas. The sellers are then free to sign up the offer with the Brady family.
Again, this is a very basic explanation, but it essentially an SSP-TKO (Timed Kickout Clause) gives first dibs to the first buyers.
SSP-CM: Sale & Settlement of Other Property with Continued Right to Market
Lastly is the type of home sale contingency that is most advantageous to the sellers. This is called SSP (Sale & Settlement of Other Property) CM (with a Continued Right to Market.) This is means that the Arizonas accept John & Kate’s offer. However, while John & Kate are working on selling the ranch, the Arizonas can continue to market their mansion to other buyers.
With an SSP-CM, when the Brady family comes along, the Arizonas can accept that offer & kick John & Kate’s offer to the curb without any warning.
This home sale contingency is basically a race to see who can get a buyer first. If John & Kate get a buyer on the ranch, the Arizonas then take the mansion off the market. If the Arizonas get a nice offer that they want to move forward with, John & Kate are out.
• A home sale contingency means that a buyer needs to sell their current home in order to purchase a new one.
• There are essentially 3 ½ types of home sale contingencies.

1. SSP
• Sale & Settlement of Other Property.
• Best for the buyer.
• Seller takes their home off the market.
• Buyer given time to sell their current home.

• Sale & Settlement of Other Property with a Timed Kick-Out Clause.
• Deemed by Katina to be the fairest scenario for all parties
• Both parties try to sell their homes at the same time.
• If the seller gets another buyer who makes an acceptable offer on their home, they give the original buyers “first dibs” to make the sale work.

3. SSP – CM
• Sale & Settlement of Other Property with a Continued Right to Market.
• Best for the seller.
• Both parties try to sell their home at the same time.
• If the sellers get another offer they like, the first buyers are out without any warning.
3.5. SOP
• Settlement of Other Property
• Buyers already have a buyer for their current home – they’re just waiting for closing.
Phew! I know… that’s a lot of information, & trust me – we haven’t even scratched the surface on this topic. That’s why it’s extremely important that you have an experienced Realtor who is comfortable & familiar with home sale contingencies. Oftentimes, I get pretty creative & even suggest a combination of the contingencies or get very firm on negotiating other terms for my sellers to help assuage the risks before an SSP is considered. (Okay… now I’m just showing off.)

I’m Always Here & Happy to Help!

Katina Hunter
Team Lead for the Katina Hunter Team with Coldwell Banker