Texas Sale of Other Property Contingency Addendum Explained
Understanding the Texas Sale of Other Property Contingency Addendum
What Texas buyers and sellers should understand when the purchase of one home depends on the successful sale and closing of another property.
Buying a new home before selling your current home can create a difficult timing and financial challenge. Many homeowners need the equity from their existing property to make a down payment, pay closing costs or qualify for their next mortgage.
Texas has a specific contract form for this situation: the Addendum for Sale of Other Property by Buyer, commonly referred to as the sale-of-other-home contingency addendum.
The Texas Real Estate Commission identifies this form as TREC Form 10-6 / TXR 1908. It is intended for a buyer who will be unable to purchase the new property unless the buyer's existing property is sold and closed.
What Does the Addendum Do?
The addendum makes the purchase contract contingent upon the buyer's receipt of proceeds from the sale of the buyer's other property. The address of that property and the contingency deadline are entered into the addendum.
The form focuses on the buyer's actual receipt of the sale proceeds. Merely listing the home, receiving an offer or placing the home under contract does not necessarily mean the contingency has been satisfied. The sale generally must close and the buyer must receive the required proceeds.
The contingency deadline should not be later than the closing date stated in the primary purchase contract.
Why Would a Texas Buyer Use This Addendum?
A buyer may need to sell an existing home before purchasing another for several reasons:
- The equity is needed for the new home's down payment.
- The sale proceeds are needed to pay closing costs.
- The lender requires the existing mortgage to be paid off.
- The buyer cannot qualify while carrying both mortgage payments.
- The buyer wants to avoid the financial risk of owning two homes.
- The buyer needs funds from the sale for moving or improvements.
Without an appropriate contingency, a buyer who cannot close because another property did not sell could face a potential default under the purchase contract.
What Happens If the Buyer's Property Does Not Sell?
The addendum establishes a specific date by which the contingency must either be satisfied or waived by the buyer.
If the buyer has not received the proceeds and has not properly waived the contingency by that deadline, the purchase contract automatically terminates under the terms of the addendum. The buyer's earnest money is then refundable as provided by the form.
Deadlines Are Extremely Important
The addendum states that time is of the essence and requires strict compliance with its performance deadlines. Buyers and sellers should carefully track every date and notice requirement.
Can the Seller Accept Another Offer?
The form contains an important protection for the seller. If the seller accepts another written offer to purchase the property, the seller may notify the first buyer of:
- The seller's acceptance of the other written offer; and
- The seller's requirement that the first buyer waive the contingency.
The first buyer must then waive the contingency within the number of days written into the addendum. If the buyer does not properly waive it by that deadline, the original contract automatically terminates and the buyer's earnest money is refundable under the form.
This provision is frequently described in the real estate industry as a kick-out provision. However, the actual rights and responsibilities of the parties are controlled by the written contract and addendum—not by the informal nickname.
How Does the Buyer Waive the Contingency?
Under TREC Form 10-6 / TXR 1908, the buyer may waive the contingency only by:
- Providing the seller with written notice of the waiver; and
- Depositing the amount of additional earnest money stated in the addendum with the escrow agent.
Notices and waivers must be in writing and delivered according to the notice provisions of the purchase contract.
A buyer should not waive this contingency casually. Before waiving it, the buyer should speak with the lender and confirm that the buyer can still close and fund the purchase if the other property does not sell.
What Is the Risk of Waiving the Contingency?
Once the buyer properly waives the contingency, the buyer generally gives up the protection that made the purchase dependent on receiving proceeds from the other property.
If the buyer later fails to close and fund solely because the buyer did not receive those proceeds, the addendum states that the buyer will be in default. The seller may then pursue the remedies available under Paragraph 15 of the primary contract.
Are All Contingent Offers Equally Risky?
No. The strength of a sale-contingent offer often depends on the current status of the buyer's property.
| Status of Buyer's Property | General Level of Uncertainty | Seller Considerations |
|---|---|---|
| Not yet prepared or listed | Highest uncertainty | No established market response, buyer or anticipated closing. |
| Listed but no accepted offer | Moderate to high uncertainty | Review price, condition, days on market and showing activity. |
| Under contract with contingencies | Moderate uncertainty | Review inspection, financing, appraisal and option deadlines. |
| Under contract with major contingencies completed | Lower uncertainty | Confirm closing date, financing status and remaining conditions. |
A seller should evaluate the complete offer rather than rejecting it solely because it includes a sale contingency. Price, financing, additional earnest money, closing date and the marketability of the buyer's property may all affect the seller's decision.
Important Considerations for Buyers and Sellers
For Buyers
- Prepare and price the existing home competitively.
- Consider listing before making the new offer.
- Obtain updated mortgage approval.
- Confirm whether you could qualify without the sale proceeds.
- Understand the waiver and additional earnest-money requirements.
- Track all notice and contingency deadlines carefully.
- Coordinate the two closing dates with the lender and title company.
For Sellers
- Determine whether the buyer's property is already listed.
- Review its price, condition and location.
- Ask whether the buyer's property is under contract.
- Evaluate the buyer's financing and available cash.
- Negotiate an appropriate contingency deadline.
- Understand the procedure required after accepting another offer.
- Discuss continued marketing and backup-offer strategies.
Example of How the Contingency Could Work
A Simplified Texas Home-Sale Contingency Timeline
- A homeowner submits an offer to purchase a new home using the Addendum for Sale of Other Property by Buyer.
- The addendum identifies the homeowner's current property and gives the buyer until an agreed date to receive the proceeds from its sale.
- The seller accepts the contingent offer, but another qualified buyer later submits an offer that the seller accepts.
- The seller gives the first buyer the written notices required by the addendum and requires the first buyer to waive the contingency.
- The first buyer must decide whether to provide the written waiver and deposit the agreed additional earnest money within the stated time.
- If the buyer does not timely waive the contingency, the first contract automatically terminates and the earnest money is refundable according to the addendum.
This is only a general example. Actual contract deadlines, financing conditions and notice requirements will vary from one transaction to another.
Are There Alternatives to a Sale Contingency?
Depending on the buyer's finances, loan qualifications and risk tolerance, possible alternatives may include:
- Selling the current home before purchasing the next home.
- Negotiating a temporary seller leaseback.
- Using short-term housing between the two transactions.
- Obtaining bridge financing when available and appropriate.
- Using a home-equity product, subject to lender and legal requirements.
- Qualifying to carry both properties temporarily.
- Coordinating back-to-back closings.
Buyers should discuss financing alternatives with a qualified mortgage professional. Some options involve additional costs or significant financial risk and may not be appropriate for every buyer.
Why Experienced Contract Guidance Matters
A transaction involving the sale of one home and purchase of another includes two sets of inspections, financing requirements, title work, appraisals and closing deadlines. A delay or termination in the first transaction may affect the second.
An experienced Texas real estate professional can help clients evaluate the practical risks, coordinate communication among the parties and ensure that required notices are delivered to the appropriate parties.
Real estate license holders can explain how promulgated forms are commonly used, but they cannot provide legal advice outside the scope of their license. Buyers and sellers with questions about their legal rights or contract remedies should consult a qualified Texas real estate attorney.
Frequently Asked Questions
What is the Texas Sale of Other Property by Buyer Addendum?
It is a TREC-promulgated addendum used when a buyer's purchase depends on receiving proceeds from the sale of another identified property.
Does the buyer's current home only have to go under contract?
The addendum is based on the buyer's receipt of proceeds from the sale, not merely listing the home or accepting an offer. The parties should carefully review the exact contingency language and deadline.
What happens if the buyer does not receive the sale proceeds?
If the contingency is not satisfied or properly waived by the stated deadline, the contract automatically terminates and the earnest money is refundable to the buyer under the addendum.
Can the seller require the buyer to remove the contingency?
If the seller accepts another written offer, the seller may provide the notices required by the addendum and require the buyer to waive the contingency within the negotiated time period.
Does the buyer have to deposit additional earnest money?
To waive the contingency under TREC Form 10-6 / TXR 1908, the buyer must provide written notice and deposit the amount of additional earnest money specified in the addendum with the escrow agent.
What happens if the buyer waives the contingency but cannot close?
If the buyer fails to close solely because the proceeds from the other property were not received, the buyer may be in default and the seller may exercise the remedies available under the purchase contract.
Is an offer with a home-sale contingency always a weak offer?
Not necessarily. The risk may be substantially lower when the buyer's existing property is already under contract and major contingencies have been completed. The seller should evaluate all terms of the offer.
Buying and Selling a Home at the Same Time?
Keith & Sheila Realty Group can help you understand the process, evaluate your timing and create a coordinated plan for both transactions—with straightforward guidance and no pressure.
Source: Texas Real Estate Commission — Addendum for Sale of Other Property by Buyer, TREC Form 10-6 / TXR1908
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