Contingencies in real estate contracts

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Mortgage and Lending

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.  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.

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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.

 

Quick Tips for Getting Started on Your Home Purchase

 

Karl Peidl
Lincoln Mortgage Company
251 Bellevue Avenue, Suite 102
Hammonton, NJ 08037

Accredited Loan Consultant

609-878-7013

kpeidl@linc-mort.com

www.karlpeidl.com

 

Pennsylvania: Licensed by the PA Department of Banking as a First Mortgage Banker and licensed pursuant to the PA Secondary Mortgage Loan Act. New Jersey: Licensed by the N. J. Department of Banking and Insurance Maryland: Authorized Mortgage Lender by the State of Maryland Commissioner of Financial Regulation. Florida: Licensed Mortgage Lender by the Florida Office of Financial Regulation. Delaware: Licensed Lender by the Delaware Office of the State Bank Commissioner.

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Tags:
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Rainmaker
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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Too many agents that were new to the business 4 years ago did not learn the art of writing contingencies and need to be sure they understand them when they get them.

Sep 21, 2009 06:01 AM #1
Rainer
118,327
Ginger Moore
Wilkinson & Associates Realty - Gastonia, NC

Hi Karl, yes, nice blog on contingencies.  You have some very good information here. thanks for sharing!

Sep 21, 2009 06:04 AM #2
Rainer
108,048
Karl Peidl
Moorestown, NJ
Accredited Loan Consultant

Tim - Something tells me that many of those agents are no longer in the business.

Sep 21, 2009 06:14 AM #3
Rainer
108,048
Karl Peidl
Moorestown, NJ
Accredited Loan Consultant

Ginger - Thanks for stopping by.  I'm glad my information helps.

Sep 21, 2009 06:22 AM #4
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Rainer
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Karl Peidl

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