Contingency for the Sale of an Existing Home

Under older versions of the TAR contract (2006 and prior), there was no pre-printed provision about whether the contract was contingent on the buyer’s ability to sell his current home. However, it was typically not necessary because if the buyer couldn’t sell his existing home, he couldn't qualify for a loan to buy the new home and the financing contingency would be invoked. This would allow the buyer to have a "sale of existing home" contingency contract without actually having to put such a contingency into the contract. In other words, the buyer was able to say, “the contract may not have said that the purchase was contingent upon the sale of my existing home, but I can’t get a loan without selling my existing home and it was contingent upon my ability to get a loan.” That has all changed, and the current version of the contract says the following:

“Loan Obligations
. . . (5) Unless otherwise stated in this Agreement, Buyer represents that this loan is not contingent upon the lease or sale of any other real property and the same shall not be used as the basis for loan denial;” (lines 102 & 103)

Therefore, if you are the selling agent and the buyer has to sell his existing home in order to purchase the new one, it is VERY IMPORTANT to specify that the contract is contingent upon that. Here is some suggested language you can put in paragraph 18, Special Stipulations:

“This contract, and performance by the Buyer hereunder, is contingent upon the sale and closing of the Buyer’s existing home located at ______________________. In the event said home does not sell and close prior to the scheduled closing date for this transaction, then Buyer shall have the option to cancel this contract by written notice to Seller and receive a full refund of the earnest money. For purposes of this provision, Buyer agrees to pursue the sale of closing of his existing home in good faith.”

IMPORTANT NOTE FOR MISSISSIPPI: The north Mississippi version of the contract is still the 5/2006 version, which does not contain this new language. Therefore, the old rules still apply with this form. To avoid confusion and clarify the expectations of the parties on the front end, we recommend using the same suggested language above in the Special Stipulations if the parties desire such a contingency.

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