What is a Contingency?

Many industries have their own languages. Real estate is no exception. That is what our question this week deals with.

What are contingencies?

Contingencies in a contract are a legal way of saying that unless certain things happen you will not fulfill your end of the agreement. For instance, say you hire a person to do some work for you around your home and you make the agreement that you will not pay him until all of the work is completed satisfactorily. That is a contingency. In other words, you have a contract to pay, but only if all of the work is done to your satisfaction. In other words, if you are not satisfied, no matter how much work was done there is no obligation to pay.

Where contingencies come into play in a real estate contract is as a way to qualify your obligation to complete the purchase and protect the parties in the contract. In a real estate contract almost all for the contingencies must be fulfilled or removed from the contract within a certain timeframe known as the contingency period.

While it is true that most contingencies are designed to protect the buyer, there are a few that protect the seller's obligation to complete the sale to the buyer. For instance, if after the contingency period, it becomes evident that the buyer is not working toward the completion of the sale, the seller may cancel the contract. A buyer has the same contingencies and a few more. For instance if the sellers fails to deliver the required disclosures to the buyer within the contingency period, he may cancel. Also if during the contingency period, the buyer inspects the property, and finds it unsatisfactory, or he can not get the loan, or the property fails to appraise for a satisfactory amount, he may cancel. Next week we will talk about the effect that waiving or removing a contingency can have on the contract.

Do you have a question? Are you ready to make a move in this market? Please call 916-376-9328 or email Nick@bignicksells.com. I would be happy to help. I don't want you to miss the next boom.