When you sign a contract there are many time frames and provisions that are critical for the seller and the buyer are aware of them. We can call this "CONTINGENCY" in a real estate sale and purchase contract.
What Is a Contingency?
The dictionary defines a contingency as "a future event or circumstance that is possible but cannot be predicted with certainty." That's an accurate definition for home buying contingencies, as well. When you include these items in a purchase contract, you are essentially giving yourself a way to back out of the contract if a certain event or circumstance occurs.
Here's another way to think about it: A real estate contingency is a condition that must be met in order for the deal to go through. It is a requirement for the completion of the sale.
For instance, if there is a home inspection contingency written into the sales contract, it means the buyer has a right to back out of the deal if the inspector finds serious problems with the house. So the sale is contingent upon the buyer's acceptance of the inspection results.
In this example, the inspection is the "future event or circumstance that cannot be predicted with certainty," as stated in the definition above.
These are the most common contingencies in real estate contract.
There is no limit to how many purchase contingencies you can put into your sales contract. The document itself is mostly boilerplate and standardized. But, as a home buyer, you could attach as many real estate contingency items as you want . It might make the seller less inclined to accept your offer, which is something to consider. But it is your legal right to include them.
Here are two contingencies in Florida FAR/BAR Standard contract form includes ; Home Inspection and Buyer's financing unless the purchase is in cash.
Home Inspection -- Even as-is contract you are executing the buyer has right to inspect a home and within the inspection period the buyer can get "OUT" of contract without losing their earnest deposit money. This is one of the most common types of real estate contract contingencies, and with good reason. This contingency allows you to back out of the deal if you're not comfortable with something uncovered during the inspection process. We recommend that you include this one, at a minimum.
Financing -- This is another common type of purchase contract contingency. Most home buyers use mortgage loans to cover the cost of their purchase, or at least a big chunk of it. The problem is that mortgages can "fall through" somewhere between the purchase agreement and closing. The buyer gets pre-approved for a loan and makes an offer on a house. The seller accepts the offer. A week later, the mortgage lender's underwriter finds a problem with the application file, and the loan is denied. It happens. In such cases, the buyer would want a way out of the purchase contract. That's what a financing contingency does.
These are the contingencies you can add to your addendum to the contract.
Sale of Current Home -- This provision is a creative way to make an offer to purchase home when your home is not sold yet. Who wants to make sure your home sale prior to purchase new home may consider this option : the sale contingent upon the successful sale of the buyer's current home.
If it's the seller's market there would be many other offers that the seller may go with.
Home Appraisal -- Mortgage lenders use home appraisals to make sure the property being purchased is worth the amount the buyer has agreed to pay. In some cases, the home will appraise for less than the purchase price. A home appraisal contingency gives you a chance to renegotiate the purchase price to reflect the appraisal, or to back out of the deal entirely.
Clear Title -- The title is a legal document that shows who has owned a home in the past, and who currently owns it. It is the official history of ownership. During a typical home-buying scenario, a title company will check the title to make sure it is "clear" of liens, disputes or other issues. Some title issues can be resolved between the purchase agreement and the final closing. Others can be more problematic. Title contingencies give buyers a way out of the contract, in the event of unresolvable issues.
Disclaimer: These are not the only contingencies that can be included within a real estate purchase agreement. Also does not designed to legal advise or any sort of consultation. but to provide you with general information.
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