Consumers -What You Need To Know About Contingencies

What You Need To Know About Contengencies

Let me start by telling you what a contingency is. It is a formal clause in a real estate contract, that specifies particular conditions that must be met by either the seller or the buyer in order to proceed to the next step in the contract. Contingencie are found in every contract to protect the interests of both sellers and buyers. If either side fails to meet any of the requirements, it can result in breach of contract.

There are three different categories that make up a contingency. Protection for the buyer, protection for the seller and reciprocal protection of both parties. Most contracts normally contain two contingencies, the mortgage contingency and home inspection contingency.

A mortgage contingency stipulates that the buyers will make every effort to obtain a mortgage for the particular amount the seller is asking for. If the buyer obtains a mortgage then the contingency is removed. However, if the buyer cannot obtain a mortgage for whatever reason, then the buyer may withdraw from the contract without penalties. So the mortgage contingency protects the buyers interest if financing is not available they are not held to the contract they had signed.

A home inspection contingency also protects the buyers. If the house is found unsuitable due to issues such as, significant termite damage, unsafe electric wiring, or material defects, it allows the buyer to be able to withdraw from the contract without penalty and the return of all deposits. If issues that are found are found fixable, it gives the buyer the ability and right to negotiate repairs with the seller.However if the seller refuses to repair any of the repairs for the buyer, the contract becomes invalid, stopping the seller from forcing the contract on the buyer.

Contingencies can vary depending on the circumstances and what they require. Buyers can include anything from asking a seller to remove something to asking for a new water heater to be installed. On the other hand, sellers can have their own requests as well to the buyer, like asking for a certain amount of time to remove things from the home or property or giving them enough time to vacate the premises.

There are two important things to keep in mind when contingencies are involved....

One, having several contingencies from either side by the buyer or the seller, can weaken the contract and make it even more complicated than it has to be. To many from the seller can push the buyer away from the deal and to many from the buyer can push the seller from accepting the deal. Second, always work with an experienced agent to make sure that all your interests are taken care of , so you know that all your rights are protected, regardless if your the seller or the buyer.