The purchase or sale of a home is a major transaction. For many people, it will be the most significant transaction they will ever make. That’s why it’s important to ensure that a well-written, enforceable contract guides any sale or purchase of a home. Contingencies are a crucial part of any real estate contract.
A contingency is exactly what it sounds like. The purchase or sale of a home is dependent, or contingent, on certain terms laid out in a contract. Contingencies allow for greater flexibility in real estate transactions. You can use a contingent agreement as leverage to help you get what you want.
Types of contingencies
In theory, you could include any type of contingency in your real estate contract. However, some of the more common contingencies are:
- Home inspection contingency
- Home sale contingency
- Financing contingency
- Appraisal contingency
Both parties can negotiate contingent terms. When you agree to the terms, you are bound by them. You can move forward with the transaction after all contingencies have been satisfied.
What happens if a contingency isn’t satisfied?
The purpose of a contingency is to enable either party to back out of a contract if the terms aren’t satisfied. If a contingency falls through, you have the option of renegotiating the terms of the contract. An alternative solution may be available. If not, you can walk away without suffering a significant penalty.
You should never enter into a real estate contract without seeking legal counsel. A skilled professional can help protect your interests and advocate on your behalf throughout the transactional process.