Contingencies Continued....."The Bump"

In the last post we discussed contingencies and left off with the "Sale and Transfer of Title" contingency that is used when a buyer has an existing property to sell before they can complete the purchase of a new home. Various markets may handle this slightly different but in general when a buyer makes their offer contingent on the sale of another property, the seller is then agreeing to wait.

The buyer then puts their existing home on the market (if they have not already done so) and the wait revolves around getting an offer on that home, getting any contingencies removed (i.e. attorney approval, mortgage, home inspection) and then getting to closing where title is finally transferred. If the buyer of this existing house has to sell their home....well, you can see how this can get drawn out.

Therefore, typically there is an addendum to the original purchase offer that allows the seller to a) give the buyer a deadline so they are not left waiting indefinitely; and b) an "out" should another offer come along. While the deadline is included, if the seller and buyer wish to continue beyond the deadline it can be extended; "b" is where the "Bump" comes in to play.

Here's an example of how it works:

Seller accepts offer from Buyer #1, contingent on Buyer #1 selling their existing home. The Addendum indicates that the "Bump Period" is two calendar days. Buyer #2 comes along and they DON'T have an existing house to sell. Buyer #2 submits an offer with a price and terms that the Seller likes. Seller then serves the "Bump Notice" on Buyer #1. The Bump Notice states that Buyer #1 has two calendar days to remove their "Sale and Transfer of Title Contingency."

If Buyer #1 can remove the contingency within the two day window (i.e. they can get a mortgage loan commitment which does not require the sale of their existing home; they have a non-contingent contract come in on their existing home; or they are able to come up with the cash to pay for the full amount of the house), then Buyer #1 can proceed and will not get "bumped."

If Buyer #1 cannot remove the contingency, then their contract is cancelled and Seller will proceed with the sale to Buyer #2. Buyer #1 gets their deposit back.