These contract clauses have two main classifications:
- Sale and settlement contingencies
- Settlement contingencies
The latter is pretty simple, as people tend to use it when they're committed to a contract and other contingencies have been removed. This clause is helpful to protect the buyer from any legal repercussions if they cannot go through with the sale. Nonetheless, as these contracts don't have a "kick-out" clause, the seller can't resell the property until the contingency ends and the contract breaks.
On the other hand, the sale and settlement contingency is rare. This clause contemplates the "kick out" option. Therefore, any other buyer can act quicker and buy the property. If this happens, the seller must immediately let the previous buyer know this to effectively move out.
This contract becomes legally binding once the original buyer gets the property under contract and the transaction is executed.
The home sale contingency is quite risky for both parties, and it is only done in very competitive and volatile markets. This happens because if you're the buyer, you could get kicked out at any moment if the demand for the property is high enough. Nonetheless, if you're the seller, you have no guarantee that your property is going to be sold.