Home Buying Contract Contingencies
Questions That Must Be Answered Before You Close on the Real Estate
Home buying contingencies are written clauses in your contract that give you time to evaluate some aspect of the property before you proceed to closing. Think of them as questions that must be answered or events that must (or must not) take place. If contingencies aren't met, the wording should allow you to back out of the contract with no penalties.
Common Home Buying Contingencies
The pre-printed contract forms used by real estate agents always include common contingencies, some on the main body of the form and others that can be added as separate pages. Use the pre-printed forms when possible instead of writing your own contingencies, because forms are written to adhere to the laws of the state they are used in.
The contract should outline the type of financing you are willing to accept and include a clause that releases you from the purchase if those terms cannot be obtained.
Additional Inspection Contingencies
Surveys Buyers often make approval of a property dependent on the results of a boundary survey.
You might expect it to show there are a minimum number of acres; that a specific lot line is where the seller says it is; or that neighbors have not encroached the property (built on it).
Contingencies are useless if they do not explain what you're trying to achieve. Here are some examples of poorly written contingencies that offer no protection for a buyer.
State exactly what type of results are acceptable.
If You Must Sell Your Home First
You can make an offer that's contingent on the sale of your current home--meaning that you cannot purchase until the current home is sold. Some sellers will accept such offers, others won't.
That type of contract usually includes a "kick out clause," a statement that basically says: "if we get another acceptable offer, you have "X" number of hours to remove your sales contingency and move forward to buy the house, whether you've sold your current house or not." If you cannot move forward, the seller can back out of your contract.
For Sale By Owner Contracts
For your protection, always use California Association of Realtors (CAR) Contracts.
Every contract is unique. Take some time to brainstorm before you make an offer to purchase. Outline your questions, turning them into contingencies that explain what you want to do and what results you expect to see. If you are unsure how contingencies should be worded, seek advice from a Empire Realty Professional.