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. |
