Understanding the Arizona Buyer Contingency Addendum

Introduction

When purchasing a home in Arizona while needing to sell your current property, one document becomes particularly important: the Buyer Contingency Addendum. This critical form, created by the Arizona Association of REALTORS®, provides protection for buyers who need to coordinate the sale of their existing home with the purchase of a new one. Without this document, buyers could find themselves in the precarious position of owning two properties simultaneously or breaching a purchase contract if their current home doesn’t sell in time.

This comprehensive guide will explain the Arizona Buyer Contingency Addendum in detail, helping you understand how it works, when to use it, and how it protects your interests during what could otherwise be a very stressful transition between homes.

What Is the Buyer Contingency Addendum?

The Buyer Contingency Addendum is a supplemental document that becomes part of your purchase contract when buying a new home while still owning another property that needs to be sold. Updated as of July 2023, this two-page form creates a contingency in your purchase offer that makes your obligation to complete the purchase dependent on the successful sale of your current home.

In essence, this addendum answers a crucial question: “What happens if my current home doesn’t sell before I’m supposed to close on my new home?” Without this protection, you might be legally obligated to purchase the new home regardless of whether your current property has sold, potentially leading to financial strain or even default on the purchase contract.

When to Use the Buyer Contingency Addendum

You should consider using this addendum when:

• You need the proceeds from your current home’s sale to purchase the new property
• You can’t or don’t want to make payments on two properties simultaneously
• You want to coordinate the closings to create a smoother transition between homes
• You need to protect yourself from the financial risk of owning two properties

The addendum is especially important in uncertain market conditions where homes might take longer to sell, or when your financial situation doesn’t allow for carrying two mortgages simultaneously.

How the Addendum Is Structured

The Arizona Buyer Contingency Addendum is structured into three main sections, each addressing different contingency scenarios. Understanding this structure is crucial to completing the form correctly:

Section 1: Contingent Upon Closing of Buyer’s Property

This section applies when you have already accepted an offer on your current home but haven’t closed escrow yet. It requires:

• Your property address
• A deadline by which your current home’s sale must close
• Documentation of the accepted offer

Section 2: Contingent Upon Accepted Offer for Buyer’s Property

This section applies when you haven’t yet received an acceptable offer on your current property. It requires:

• Your property address
• A deadline by which you must receive an acceptable offer
• Provisions for what happens once you receive an acceptable offer

Section 3: Additional Terms and Conditions

This section applies to both scenarios above and outlines:

• Documentation requirements for the accepted offer
• Procedures if your accepted offer cancels
• How to waive the contingency if you choose to proceed without selling
• When contract timelines begin
• Procedures for delivering notices

Understanding which section applies to your situation is the first step in properly completing and using this addendum.

Breaking Down the Addendum Section by Section

Let’s examine each section in detail to understand exactly how this addendum protects you and what obligations it creates.

Section 1: Contingent Upon Closing of Buyer’s Property

This section applies when you already have an accepted offer on your current home but haven’t closed escrow yet. Here’s what each component means:

Property Identification

The form requires the address of your current property that has a pending sale. This clearly identifies which property’s sale will affect the purchase contingency.

Documentation of Accepted Offer

You must attach documentation showing you have a bona fide accepted offer. This typically includes your sales contract and any other relevant documents specified in line 48, such as:

• Pre-qualification form for your buyer
• Proof of funds (for cash offers)
• Loan commitment letters
• Inspection notices showing buyer’s intent to proceed

Closing Deadline

You must specify a date by which your current property must close escrow. If it doesn’t close by this date, you have three days to either:

• Waive the contingency (proceed with buying the new home regardless)
• Allow the purchase contract to be cancelled with earnest money returned to you

This deadline is crucial—setting it too early might not give enough time for your sale to close, while setting it too late might make your offer less attractive to sellers.

Section 2: Contingent Upon Accepted Offer for Buyer’s Property

This section applies when your current home isn’t yet under contract. It provides more extensive protections but may be less attractive to sellers. Here’s what each component means:

Property Identification

As in Section 1, you must identify your current property that needs to be sold.

Offer Acceptance Deadline

You must specify a date by which you need to receive an acceptable offer on your property. If you don’t receive an offer by this date, you have three days to either:

• Waive the contingency (proceed with buying the new home regardless)
• Allow the purchase contract to be cancelled with earnest money returned to you

Accepted Offer Notification Period

If you do receive an acceptable offer by the deadline, you must deliver documentation to the seller within a specified timeframe (typically three days). The seller then has three days to review these documents and decide whether to:

• Continue with the transaction
• Cancel the contract (if they find your pending sale unsatisfactory)

This creates an unusual “contingency within a contingency”—even after you get an offer on your current home, the seller of your new home can still evaluate whether your pending sale looks solid enough to proceed.

Closing Contingency

If the seller approves your pending sale, the contract converts to a “closing contingency” similar to Section 1. You specify a date by which your current property must close, and if it doesn’t, you can either waive the contingency or cancel the purchase contract.

Back-Up Contract Provisions

This subsection addresses what happens if the seller accepts a back-up offer while waiting for you to sell your home. If this occurs, the seller can give you notice, and you’ll have a specified period (typically three days) to either:

• Waive your contingency and proceed with the purchase
• Allow your contract to be cancelled with earnest money returned

This provision protects sellers from having their property tied up indefinitely while you try to sell your home.

Section 3: Additional Terms and Conditions

This section applies to both contingency types and outlines important procedural details:

Accepted Offer Documents

This specifies exactly what documentation you must provide to prove you have a legitimate offer on your current property. Typically, this includes:

• Purchase contract
• Pre-qualification form or proof of funds
• Earnest money receipt
• Other verification documents

Cancellation Procedures

This subsection explains what happens if your pending sale falls through. You must notify the seller within three days and either:

• Cancel your purchase contract (and receive your earnest money back)
• Waive the contingency and proceed with the purchase

Contingency Waiver Provision

If you decide to waive the contingency and proceed with purchasing the new home without selling your current property, you must provide either:

• Documentation from your lender confirming you can close without selling
• Evidence of financial ability to close (for cash purchases)

This prevents buyers from waiving contingencies they can’t actually fulfill.

Contract Time Periods

This critical provision establishes when contractual timelines begin. Depending on which box is checked, timelines for inspections, loan processing, etc., might begin:

• Immediately upon contract acceptance
• Only after seller approves your pending sale or you waive the contingency

This timing distinction dramatically affects when you need to schedule inspections, secure financing, and meet other contractual obligations.

Failure to Deliver Notice

This clause establishes that if you fail to provide required notices within specified timeframes, the seller can issue a cure notice that could lead to breach of contract and forfeiture of earnest money.

Status Updates

The seller has the right to request updates on your property’s sale status, and you’re obligated to provide them.

Practical Strategies for Using the Buyer Contingency Addendum

How you complete and negotiate this addendum can significantly impact both your protection as a buyer and the attractiveness of your offer to sellers. Consider these strategic approaches:

For Buyers With an Accepted Offer (Section 1)

• Be Realistic About Closing Timelines: Set your closing deadline slightly beyond your expected closing date on your current home to account for unexpected delays.
• Provide Robust Documentation: Include not just the contract but also your buyer’s pre-qualification letter, inspection notices showing their intent to proceed, and any other evidence showing the strength of your pending sale.
• Consider a Closing Window Rather Than a Date: If the seller agrees, you might negotiate language specifying closing must occur “on or before” a certain date, giving you flexibility if your sale closes early.
• Coordinate Closings Strategically: Try to schedule your current home to close 1-2 days before your new purchase to ensure funds are available for the new purchase.

For Buyers Without an Accepted Offer (Section 2)

• Be Prepared for Resistance: Many sellers hesitate to accept Section 2 contingencies, especially in competitive markets. Be prepared to strengthen other aspects of your offer to compensate.
• Set Reasonable Timeframes: Be realistic about how long it might take to receive an acceptable offer on your property. Setting an unrealistic deadline could force you to either waive the contingency prematurely or lose the deal.
• Sweeten the Deal: Consider offering a higher price, larger earnest deposit, or other favorable terms to make your contingent offer more attractive.
• Have Your Home Ready to Sell: Ideally, your current home should already be on the market (or ready to list immediately) when you make a contingent offer. This demonstrates seriousness and shortens the potential wait for the seller.
• Consider a Kick-Out Clause Alternative: In competitive markets, sellers might prefer a kick-out clause (giving them the right to continue marketing the property) rather than a full contingency. Be prepared to discuss alternatives.

For All Contingent Buyers

• Understand Contract Timing: Pay close attention to when contract timelines begin. If inspections and other deadlines don’t start until your contingency is resolved, plan accordingly for a potentially compressed timeline later.
• Prepare for Waiver Scenarios: Have a back-up plan in case you need to waive the contingency. This might include bridge loan options, temporary housing arrangements, or family assistance.
• Keep the Seller Informed: Proactively communicate progress on your home sale, even beyond the required notices. This builds goodwill and confidence in the transaction.
• Consult Your Lender Early: Ensure your lender understands the contingent nature of your purchase and has evaluated your ability to close with and without selling your current home.

Common Challenges and How to Address Them

Seller Resistance to Contingent Offers

Challenge: In competitive markets, sellers often prefer non-contingent offers.

Solution:

• Present a strong pre-approval letter showing you qualify to carry both properties temporarily if needed
• Offer a higher earnest money deposit to demonstrate commitment
• Consider a higher purchase price in exchange for the contingency
• Have your current home already on the market with professional photos and marketing

Timing Complications

Challenge: Coordinating two transactions creates complex timing issues.

Solution:

• Build buffer time into your deadlines
• Discuss temporary occupancy agreements (rent-back options) with both your buyer and seller
• Pre-arrange with your lender to expedite closing once conditions are met
• Consider temporary housing options if timing becomes problematic

Back-Up Offers

Challenge: Your seller receives an attractive back-up offer, creating pressure to remove your contingency.

Solution:

• Accelerate marketing efforts on your current home
• Consider price reductions or incentives to speed up your sale
• Be prepared to either waive the contingency or walk away
• Have bridge financing options pre-arranged if needed

Sale Falls Through

Challenge: Your pending sale cancels, putting your purchase at risk.

Solution:

• Immediately relist your property at a more aggressive price
• Evaluate whether you can proceed without selling (bridge loan, family assistance)
• Communicate openly with the seller about your situation and plans
• Be prepared to make a decision within the three-day window specified in the form

Real-World Scenarios

To better understand how this addendum works in practice, let’s examine some common scenarios:

Scenario 1: The Smooth Transition

Situation: John and Mary have an accepted offer on their current home scheduled to close on June 15. They find a new home and make an offer using Section 1 of the Buyer Contingency Addendum, specifying that their current home must close by June 20.

Outcome: Their current home closes on schedule on June 15, and they close on the new home on June 17. The contingency is satisfied naturally through the closing of their current home.

Lesson: When your current home is already under contract, a Section 1 contingency provides straightforward protection with minimal complications if reasonable timeframes are established.

Scenario 2: The Delayed Closing

Situation: Using the same scenario as above, John and Mary’s buyers encounter a last-minute financing issue, pushing their closing date to June 25, beyond the June 20 deadline specified in the contingency.

Outcome: John and Mary must decide within three days whether to:

• Waive the contingency and proceed (perhaps using a bridge loan)
• Request an extension from the seller (who may or may not agree)
• Cancel the purchase contract and receive their earnest money back

Lesson: Even with an accepted offer, closing delays can trigger contingency deadlines. Having back-up financial options or flexible temporary housing arrangements provides important protection.

Scenario 3: The Optimistic Timeline

Situation: David lists his home and simultaneously makes an offer on a new home using Section 2 of the contingency addendum. He specifies he needs an accepted offer within 30 days, confident his well-priced home will sell quickly in a supposedly hot market.

Outcome: After 25 days with only lowball offers, David faces pressure as his deadline approaches. He must either reduce his home’s price dramatically to secure an acceptable offer or prepare to either waive his contingency or lose his new home opportunity.

Lesson: Setting realistic (even conservative) timelines when your home isn’t yet sold is crucial. Market conditions can change quickly, and overconfidence in your home’s marketability can create difficult situations.

Scenario 4: The Back-Up Offer Scenario

Situation: Linda has a Section 2 contingency in place but hasn’t yet received an acceptable offer on her current home. The seller receives an attractive non-contingent back-up offer and issues notice giving Linda three days to waive her contingency.

Outcome: Unable to qualify for both properties and unwilling to take the risk, Linda cancels her contract and receives her earnest money back. The seller proceeds with the back-up buyer.

Lesson: The back-up offer provision creates real pressure to either sell your current home quickly or be financially prepared to proceed without selling. Always have a plan for this scenario.

Legal Implications and Considerations

The Buyer Contingency Addendum has several important legal implications:

Contractual Integration

When properly executed, the addendum becomes part of the purchase contract with equal legal standing. All parties must fulfill its requirements just as they would the main contract terms.

Notice Requirements

The addendum creates specific notice requirements with strict timelines. Failure to deliver required notices within specified periods can constitute breach of contract and potentially result in forfeiture of earnest money.

Waiver Documentation

If you choose to waive the contingency, you must provide specific documentation proving your financial ability to close without selling your current property. This prevents buyers from waiving contingencies they can’t actually fulfill.

Seller Protections

The addendum balances buyer and seller interests by:

• Giving sellers the right to review your pending sale documentation
• Allowing sellers to cancel if your pending sale seems problematic
• Creating mechanisms for sellers to consider back-up offers
• Establishing clear deadlines that prevent indefinite encumbrance of the property

Earnest Money Disposition

The addendum specifically addresses earnest money handling in various scenarios, creating clarity about when buyers are entitled to refunds and when they might forfeit deposits.

Alternative Approaches to Consider

The standard Buyer Contingency Addendum isn’t the only way to handle the challenge of buying while selling. Consider these alternatives:

Bridge Loans

A bridge loan provides temporary financing to help you purchase a new home before selling your current one. This can eliminate the need for a contingency but comes with higher interest rates and costs.

Home Sale Guarantee Programs

Some brokerages offer programs that guarantee the sale of your current home, potentially allowing you to make non-contingent offers. These typically come with specific conditions and may involve selling at a discount.

Lease-Back Arrangements

If timing is the primary concern rather than financing, you might sell your current home with a lease-back provision allowing you to remain in the property temporarily after closing while you secure your new home.

HELOC Financing

A home equity line of credit on your current property might provide the down payment for your new home, allowing for a non-contingent purchase. The HELOC would then be paid off when your current home sells.

Temporary Housing

In competitive markets, some buyers choose to sell their current home first, move to temporary housing, and then make non-contingent offers with proceeds in hand. This eliminates timing pressure but creates two moves.

Conclusion: Balancing Protection and Marketability

The Arizona Buyer Contingency Addendum provides valuable protection for buyers navigating the complex process of selling one home while purchasing another. By making your purchase conditional on selling your current property, it reduces the risk of owning two homes simultaneously or breaching a purchase contract due to inability to close.

However, this protection comes at a cost: contingent offers are generally less attractive to sellers, especially in competitive markets. Using this addendum effectively requires balancing your need for protection against the marketability of your offer.

When deciding whether and how to use this addendum, consider:

• Your financial situation: Can you potentially carry two properties temporarily if needed?
• Market conditions: How quickly are homes selling in your area and the area where you’re buying?
• Your risk tolerance: How comfortable are you with the uncertainty of coordinating two transactions?
• Your timeline flexibility: Do you have options for temporary housing if timing doesn’t align perfectly?

By thoughtfully completing the Buyer Contingency Addendum with realistic timeframes and being prepared for various scenarios, you can navigate the challenging process of buying while selling with greater confidence and protection.

Remember that while standardized forms provide important legal frameworks, they should be tailored to your specific situation. Working closely with an experienced real estate professional who understands the nuances of contingent transactions will help you navigate this complex process successfully.