Just because you have a contract does not mean a real estate deal will always go through as expected. There are many things to look out for when it comes to contingency clauses in contracts. These were, at one time, called weasel clauses. The reason for this was because a buyer or seller could weasel out of a deal because of one contingency or another.
There are many contingency clauses in place now to protect both the buyer and the seller. Here are some of the more common ones being used in the real estate market today.
Loan contingency. If the buyer can not get funding in a certain amount of time he or she can back out of the deal.
Sale of another home contingency. The buyer has made an offer but it is contingent upon whether the home he now has will sell. If it does not sell within a set time, the buyer is not held accountable for the purchase offer.
Home inspection. The sale is contingent on whether the property will pass the home inspection. The buyer has the right to inspect the home for any unforeseen damage which may not have been disclosed.
Appraisal. If the property does not meet the appraisal guidelines set forth by the lender, the buyer does not have to uphold his end of the purchase agreement.
Lead based paint inspection. When a home has been built prior to 1978, the buyer can have a lead base paint inspection. If there is evidence of lead based paint, this lets the buyer out of the contract. The house would be considered hazardous.
Water inspection. Many times the home is in a rural area where there is no access to city water. The supply is by a well. The well must be inspected. If it does not pass a health inspection, the buyer does not have to buy the property.
Wood boring insects. A termite inspection is mandatory so there is no chance of hidden damage. Although this is a problem which can easily be rectified, many buyers will not buy a home which has had evidence of termites.
Hazardous material contingency. This is similar to the lead paint inspection. During the home inspection, the contractor may come into contact with black mold or asbestos. Unless there is an agreement between the buyer and seller to have this taken care of the buyer can walk away from the deal.
Owners association acceptance. In some condos and town houses, the buyer must qualify for the home owners association. If they do not get accepted, they will be allowed to back out of the deal.
Title report. The title report will let the parties know about any liens, encumbrances, or easements on the property. If these are not acceptable to the buyer, they can walk away and not be held accountable. Something simple like the seller forgetting to mention the oil company holds the mineral rights to the property and can drill anywhere it wants, may make a buyer think twice about buying the property.
These are just some of the many contingencies which can be listed in a purchase agreement. It is up to the buyer and seller to work out as many of them as they can to seal the deal. Sometimes this just does not happen. Each party must then move on to the next house or buyer.
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