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. Contingency means that the sale is subject to meet certain terms of the contract in a given timeframe.
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. Within a specified time frame buyer has to show that he is qualified to get a loan.
- Home Inspections: Probably the most common type of contingency is the “contingent upon satisfactory completion of inspection”. There is 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, roof inspections, 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. Lenders will always want an appraisal performed; to make sure the subject property is worth as much as the amount it is paid for.
As a realtor, I always make sure that there are contingencies built into the contracts to protect my client’s interests, regardless which side I am representing in a transaction; the buyer or the seller.
Remember, just like everything else in real estate contracts, contingencies too, 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.