In real estate, a contingency is a clause in a contract that gives either the buyer or seller a way to get out of the contract if certain conditions or timelines aren’t met. Every contract can be unique. The possibilities for contingencies are virtually endless, however, here are some of the more commonly used contingencies in the order you would usually exercise them:
Home Inspections. Probably the most common type of contingency is the “contingent upon satisfactory completion of inspection”. There are any number of specific types of inspections for which a contingency might be included in a contract. Some of the more common would include inspection by a qualified home inspector for hidden defects, radon tests, sewer line inspections, pest inspections, water system inspections and inspections dealing with the presence of mold to name a few.
Appraisal. It’s not unusual for a buyer to have a contingency that requires an 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.
Financing. Contingencies that depend on the buyer being able to obtain financing are very common.
Remember, just like everything else in real estate contracts, contingencies are negotiable. In drafting your offer to purchase a home or piece of property, we will ensure that you are comfortable with all contingencies included in your contract and help you determine if it is appropriate to add additional ones as well.