Two Key Clauses to Manage Closing Risk

For many homeowners planning to move—whether upgrading to a larger property or downsizing—there is a common concern:

What happens if the sale of my current home does not close on time?

To avoid this risk, some buyers choose to wait until their existing property has fully closed before purchasing their next home. While this approach may seem safe, it often results in missed opportunities, especially in competitive markets where desirable properties sell quickly.

On the other hand, some buyers have already identified a suitable property but have not yet completed the sale of their current home. They face a difficult balance between securing the new property and managing financial and timing risks.

The good news is that there are practical strategies available. With the right offer structure, buyers can significantly reduce risk while remaining competitive.

Strategy 1: Conditional on Successful Closing of Existing Property

If your current home has already been sold and is scheduled to close within a relatively short timeframe (for example, within 30 days), you may consider including a clause in your offer stating:

The agreement becomes firm only upon the successful completion (closing) of the buyer’s existing property.

This clause differs from a traditional “Sale of Property Condition.”

In a standard sale condition, the buyer has not yet sold their property, which introduces uncertainty for the seller. In contrast, this clause applies when the property has already been sold, and only the closing remains.

From the seller’s perspective, this represents a significantly lower level of risk. As a result, offers structured in this way are often more acceptable and competitive than those with an open-ended sale condition.

Strategy 2: Flexible Closing Date Provision

Another effective, yet less commonly used, strategy is to include a clause allowing for flexibility in the closing date.

This may involve terms such as:

• The buyer may adjust the closing date with prior written notice (commonly 10–15 days)
• The closing date may be extended by an agreed period (for example, 30–90 days, subject to negotiation)

The purpose of this clause is to create a buffer period that protects the buyer from unforeseen delays.

Potential scenarios include:

• Delays in the closing of the buyer’s existing property
• Late arrival of funds
• Unexpected mortgage or financing issues

By incorporating flexibility into the agreement, the buyer reduces the risk of default and avoids being forced into a disadvantageous position.

Structuring Matters: Balancing Protection and Competitiveness

It is important to note that these clauses cannot simply be added without consideration.

Their effectiveness depends on several factors, including:

• Current market conditions
• The seller’s expectations and risk tolerance
• The overall strength and structure of the offer

A well-designed offer achieves a balance between risk management and competitiveness. Poorly structured conditions, however, may weaken the offer and reduce the likelihood of acceptance.

Final Thoughts

For buyers navigating a move involving both selling and purchasing, the structure of the offer is critical.

The right approach can help ensure a smooth transaction and protect against unnecessary risk. The wrong approach, however, may lead to missed opportunities or significant financial exposure.

In a future article, we will explore how move-up and move-down buyers can proactively design an offer strategy that is both secure and competitive from the outset.

If you are currently planning a move or actively searching for a property, careful planning at the offer stage can make a substantial difference in the outcome.