Protect deposit when making a contingent-sale offer

REThink Real Estate

Q: As a buyer, if I make a deal to buy a house contingent on the sale of my house, but my house doesn’t sell, do I get my deposit back?

A: Rarely do I get the chance to give a short, yet accurate, answer to a real estate question, so thanks for the chance! And that short answer is yes.

If you made your purchase contract contingent on the sale of your home, and you are unable to sell your home, you have the right to back out of the sale and recoup your deposit. Of course, there are a number of scenarios that can unfold in any real estate purchase, so let me brief you on how the sale of your home (or its failure to sell) can play out vis-à-vis your and the seller’s rights and obligations under your contract.

See, negotiating to buy a home with a contingency for the sale of your existing home is the real estate equivalent of placing the home on hold for the price you negotiated. Of course, you do have to write an earnest money deposit check, so it’s not a move to take lightly. But because you do have the right to back out with no penalty at any time before your home sells and you remove that contingency, it’s only fair that the seller not be bound any more than you are. Sellers are bound to sell you the home at the price and term in the contract only if you move forward when your home sells or in response to their demand.

Under most contracts that impose a contingency for the sale of the buyer’s home, the seller has the right to demand that you either commit to moving forward with the sale (irrespective of whether your home has sold) or cancel the deal, and that you make one decision or the other within a certain period of time, often 48 hours, after the seller makes the "demand to perform," as it is called in many standard real estate contracts.

Generally, sellers make a demand that you move forward or back out in the event they receive an offer from another buyer.

If the seller makes this demand, and your home hasn’t sold, you can back out of the deal and get your deposit back. Or, you can agree to remove the contingency for the sale of your home and move forward with the transaction; if you do this, though, you should be prepared to handle the financial obligations of both homes until such time as you do sell your current home. Once you remove the contingency for your home’s sale, you lose the ability to recoup your deposit if you later have to back out of the deal because it hasn’t sold.

Note, though, that even after you remove the contingency for the sale of your home, you most likely retain the ability to recoup your deposit if you later exercise another contingency as a reason to cancel the deal. These inspection, loan and appraisal contingencies typically expire or must be removed within a fairly finite period of time — 17 days or so — unless you and the seller agree to a longer time period.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Ask her a real estate question online or visit her website,


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