When real estate markets feature high demand, sellers often receive offers that include complex conditions. The term “bumpable buyer” refers to a party whose accepted purchase contract contains a vulnerability that allows the seller to seek and accept another, less complicated offer. Understanding this position is paramount for any home buyer who needs to sell an existing property to finance a new purchase. This mechanism dictates the terms under which a buyer can secure a property, even if their offer is contingent on a major event.
Defining the Bumpable Buyer
A bumpable buyer is the party whose signed contract is subject to a major contingency, most commonly the sale of the buyer’s current residence. This status means a seller has formally agreed to the transaction, but the contract remains active yet highly vulnerable to termination. The inclusion of a bump clause establishes the “bumpable” condition.
The primary contingency requires the buyer to successfully close on their existing home within a specified period to secure funds for the new purchase. Because this condition creates uncertainty for the seller, the bump clause is added to the purchase agreement via an addendum or form. This addition allows the seller to keep the property listed and available for other, non-contingent offers.
How the Bump Clause Mechanism Works
The bump clause mechanism is initiated by the seller when a second, typically superior, offer is received. A superior offer is usually one that is not contingent on the sale of a home, or one that is higher in price. This new offer acts as the trigger, allowing the seller to begin challenging the original, bumpable contract.
The seller must then issue a formal, written communication, known as a “bump notice” or “kick-out notice,” to the original buyer. This notice informs the bumpable buyer that a second offer has been accepted as a backup contract. The bump notice starts a predetermined and stringent timeline, commonly 48 or 72 hours, though it varies based on the contract terms.
During this short window, the original buyer must decide whether to remove the sale contingency or allow the contract to terminate. The bump clause is designed to force a rapid decision, ensuring the seller is not delayed by an unprepared contingent buyer. If the buyer fails to provide a formal, written response within the specified hours, the contract automatically terminates.
Buyer Options After Receiving a Bump Notice
Once the bump notice is received, the buyer has a limited set of options, all requiring formal written communication back to the seller. The first option is to waive the contingency, formally removing the condition that their current home must sell to complete the purchase. Waiving the contingency converts the contract into a non-contingent offer, meaning the buyer is obligated to purchase the home regardless of whether their current residence has sold.
This choice is a significant financial risk because the buyer must have alternate means of securing the necessary funds, such as bridge financing or cash reserves. The second option is to terminate the contract, which occurs if the buyer chooses not to waive the contingency within the defined timeline. If the buyer terminates, the purchase agreement becomes void, and the earnest money deposit is typically returned.
The seller is then free to proceed with the secondary offer that initiated the bump. The bumpable buyer must provide the seller with written notice of their decision to waive the contingency before the deadline expires. Failure to communicate the waiver in writing results in the contract being terminated, allowing the seller to move forward with the secondary buyer.
Why Sellers Use Bump Clauses
Sellers employ bump clauses primarily to minimize market risk while still accepting a contingent offer. By including the clause, the seller can secure a buyer without taking the property completely off the market for an indefinite period. This strategy protects the seller from having their property tied up for weeks or months by a buyer who may fail to sell their current home.
The clause also acts as leverage, pressuring the original buyer to commit fully or move aside. This encourages the contingent buyer to actively market their current home or be prepared to waive the contingency quickly. The bump clause ensures the seller maintains the flexibility to capitalize on a non-contingent or more appealing offer if one materializes.
Key Considerations for Bumpable Buyers
Buyers considering an offer that includes a home sale contingency must prepare for the possibility of a bump notice. A strong financial position is necessary, including a clear plan for non-contingent financing, such as a fully underwritten loan or access to a bridge loan. Buyers should confirm they have secured pre-approval for financing that does not rely on the sale of their current home before submitting the contingent offer.
It is also important for the buyer to have a rapid exit strategy for their current property, including actively listing and aggressively marketing it. Understanding the local market’s typical response window, such as a standard 48-hour period, allows the buyer to prepare for swift decision-making. Waiving the contingency without a guaranteed source of funds puts the buyer’s earnest money at risk if they are unable to close on the new home.