When you are involved in real estate by selling or buying a home, you will be working with some form of contract. When you buy a home you write a purchase contract with your real estate agent and when you are selling your home, you will receive a purchase contract from an interested buyer.
Either way, rarely do they get written without any contingencies. There are times and places where that may be appropriate, but for the most part, a purchase contract for a home here (Winnetka and North Shore communities) has at least one or two, probably more, contingencies.
First of all - what is a contingency? A contingency means that certain conditions have to be met before the sale can proceed.
What are the most common ones you are likely to use? There are three main contingencies that many contracts in Winnetka and the North Shore include:
Home Inspection - very rarely is this contingency waived - I've only seen it when builders buy properties that they plan to tear down and rebuild. I think every buyer needs to conduct a home inspection - not only is it necessary to discover any latent defects that the seller did not know about, but you, as the buyer, will learn a great deal about the house. Buyers have 5 business days to complete their inspection and 10 business days to reach resolution.
Financing- for a few years during the upswing in real estate, many contracts were written as "cash" offers. Some of these actually were paid with cash but most simply omitted the contingency because they knew they would qualify for a loan. Times have changed and loans are not as sure a thing as they used to be. Including a 45-day period to guarantee a loan is what most buyers do nowadays. Unless you really have cash.
Attorney Approval - in Cook County it is customary to work with a real estate attorney. Some people believe that you must have an attorney but this is false. But since the other party will most certainly have one, you should too to protect your interest. Thus we have the common contingency of attorney approval during which time the two attorneys work with each other to tie up details within the contract. The attorney approval period is 5 business days to respond and 10 business days to complete.
Other types of contingencies include:
Appraisal - Something I've been seeing real estate attorneys do is add an appraisal contingency. They want to protect their buyer clients from a too-low appraisal on a house and insert language pertaining to the sellers revising their accepted price to match the appraisal.
Home Sale - when buyers cannot buy unless they sell their home they insert a home sale contingency. It simply means that they are offering to buy your home but only if theirs sells first. Typically, there is a time period for this that is negotiable. And it is almost never done on newly listed properties but rather on ones that have been on the market for a while and the sellers would be more open to this. There is also a "kick-out" clause which gives the first buyer first right of refusal if another offer comes in - this is usually 24, 48, or 72 hours.
Spouse Approval - if one half of a buying party is in town previewing properties, falls in love, and just has to have that house, then this might be a good idea. The contract is signed by all but with the stipulation that if the other spouse does not want to buy the house, then the contract will be voided. This contingency should be quick since the sellers don't want to remove their house from the market for a protracted time.
Other Contingencies - Since every buyer and seller and property is different, I know that there have been many unusual contingencies added to contracts. If there is an aspect of the purchase that you need to have clarified in some way and a contingency is the only way, then I would add it.
But it's important to remember that sellers like to receive "clean" contracts with as few contingencies as possible. And if you find yourself in a bidding war situation potentially any contingency could be viewed negatively.
If you were an astronaut and had to leave the mother ship for a "walk" outside, a contingency would be the tether that brings you safely back. Real estate contingencies are no different - they keep you safe and insure that your concerns are met and you don't get Lost in Space! If you don't want to own two houses at once or worry about about your credit score, then include the relevant contingency.