There are many things that can go wrong and right when selling or buying a home. There may be time when a party may need to back out of a contract for one reason or another, from an undisclosed defect in the home to a title that is not as free and clear as they first thought.
A contingency clause is one that outlines a condition or action that must be met in order for a real estate contract to become binding. These clauses can benefit both buyers and sellers and both parties must agree to and sign the contract.
Types Of Contingency Clauses
There are many types of contingency clauses available to buyers and sellers. These include, but are not limited to:
- Appraised contingency: Protects the buyer and helps ensure that a property is valued at a minimum, specified price. If not, the contract can be terminated and earnest money refunded.
- Financing contingency: Gives the buyer time to obtain financing and if not, can terminate the contract. An extension can be granted by the seller in writing.
- Inspection contingency: Gives the buyer the right to inspect the home in a certain time frame and allows them to back out of the contract or negotiate repairs on the home before the sale can move forward.
The type of contingency clause you will need depends on your unique situation and needs. What may work for one party will not necessarily work for another so get professional advice before moving forward.
Is A Contingency Clause Right For Me?
Before you put a contingency clause on your home contract, you will need to find out if it is right for you. These clauses are legally enforceable and in some states, must be drawn up by an attorney. Talk to your lawyer and real estate agent about contingency clauses and drawing up documents that are correctly prepared.