Contingencies in real estate
contracts
In real estate contracts the contingency is a common element. Contingencies are clauses in
a contract that give either the buyer or seller a way to get out of the contract if
certain conditions or timelines aren’t met. A commonly used example is that of a
buyer making an offer on a new home before selling his existing home. The buyer needs to
sell his present home before being able to get financing on the new one. So he makes his
offer contingent upon the sale of his existing home. There will always be a time period
associated with such a contingency. If the buyer is able to get his present home sold
within that time period, the deal can go forward. But if he fails to sell within the
specified time period, the seller has the option of getting out of the deal. In most
cases, sellers won’t accept this kind of contingency, because they will most likely
feel that they can find another buyer capable of closing the deal without needing to sell
another home first. But new home builders are often willing to accept an offer contingent
upon the sale of an existing home.
Every contract can be unique. The possibilities for contingencies are virtually endless.
Some of the more commonly used contingencies would include:
Financing. Contingencies that depend on the buyer being able to obtain
financing are very common.
Home Inspections. Probably the most common type of contingency is the
“contingent upon satisfactory completion of inspection”. There are any number of
specific types of inspection for which a contingency might be included in a contract. Some
of the more common would include inspection by a qualified home inspector for hidden
defects, pest inspections, water and sewage system inspections, inspections dealing with
the presence of radon or mold, etc.
Appraisal. It’s not unusual for a buyer to have a contingency that
allows for a formal appraised value at or above purchase price. Since lenders will nearly
always want an appraisal performed too, sellers usually don’t have a problem with
this.
Remember, just like everything else in real estate contracts,
contingencies are negotiable. Always take care before signing that you are comfortable
with all contingencies included in your contract. Likewise, take time to think about what
contingencies you might like to have added.
Redmans LLC
1700 SW 12th Avenue Suite C Boca Raton, FL 33486
Phone: 561.347.2177 Toll Free Phone: 1.877.511.6678 Fax:
561.347.5599 |
