Thursday, June 28, 2012

Real Estate Contingencies Explained

Contract contingencies are a common element in Real Estate. 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.  One of the most common contingencies is that of a buyer making an offer on a new home before selling their existing home.  The buyer needs to sell their current home before they are able to get financing on the home they want to purchase. There will always be a time period associated with such a contingency.  If the buyer is able to get their current home sold within that time period then the deal can proceed.  But if they fail to sell their current home within the specified time period, the seller has the option of getting out of the deal. 
Every contract is unique.  The possibilities for contingencies are virtually endless.  Some of the more commonly used contingencies include but are not limited to:

Financing: Contingencies that depend on the buyer being able to obtain financing.

Home Inspections: 
Probably the most common type of contingency is the “contingent upon satisfactory completion of inspection”. Some of the more common may 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.

  Often times a buyer will want 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.

Like most parts of a real estate contract, contingencies are negotiable. Make sure your Real Estate Agent thoroughly explains all included contingencies and the ramifications of each before signing anything. You needed to be completely comfortable with all contingencies included in your contract.  On the flip side talk with your Agent about any contingencies you might like to add to the contract.

Please feel free to call me with questions about contingencies, contracts or any real estate issues in Lexington MA.

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