Real estate contingencies are conditions or provisions included in a real estate contract that must be met for the contract to be binding. These contingencies provide a way for buyers to protect themselves and their earnest money during the purchasing process. If a contingency is not satisfied, the buyer typically has the option to cancel the contract without any penalty. Common contingencies in real estate contracts include:
Financing Contingency: This contingency stipulates that the purchase of the property is contingent upon the buyer securing financing from a lender. If the buyer is unable to obtain a mortgage loan within a specified timeframe, they can opt out of the contract.
Appraisal Contingency: With this contingency, the sale of the property is contingent upon the home’s appraisal value meeting or exceeding the agreed-upon purchase price. If the property does not appraise for the desired amount, the buyer may negotiate with the seller, request a price reduction, or terminate the contract.
Home Inspection Contingency: A home inspection contingency allows the buyer to have the property inspected by a professional inspector. If significant issues are discovered during the inspection, the buyer can request repairs from the seller, negotiate a credit, or withdraw from the contract.
Sale Contingency: This contingency applies when the buyer’s purchase of the property is contingent upon the sale of their current home. If the buyer fails to sell their home within a specified timeframe, they may have the option to back out of the contract.
Title Contingency: A title contingency ensures that the property has clear and marketable title. If title issues arise during the title search process, the buyer may require the seller to resolve these issues before proceeding with the purchase.
Contingencies are crucial for protecting buyers from unforeseen issues and ensuring that they have the opportunity to conduct due diligence before finalizing the purchase of a property.
