One crucial aspect of a home-buying contract, which can help to protect your interests if you’re a potential home buyer, is contingency clauses.
A contingency clause is a provision in a contract that allows a party to back out of the agreement under certain circumstances without facing any legal or financial penalties. In a home-buying contract, contingency clauses can protect your interests by helping to ensure that you are not legally obligated to purchase the property if certain conditions are not met. You may choose to renegotiate the deal or even walk away if a clause allows you to do so.
Contingency clauses commonly found in real estate contracts
Picture this scenario. You committed to buying a house and even made a deposit, only to discover major issues with the foundation after a home inspection. Without a home inspection contingency clause, you could be stuck buying a house with significant problems or risk losing your deposit if you back out of the deal.
The home inspection contingency clause is just one of several types of contingency clauses common in home-buying contracts. Others include:
- Financing contingency: This clause states that the sale is contingent on the buyer securing financing. If you cannot obtain a loan within a specified period, you can withdraw from the contract without losing your deposit or facing legal action.
- Appraisal contingency: This clause allows the buyer to back out of the contract if the property is appraised for less than the purchase price. This protects you from overpaying for the property.
- Title contingency: This clause ensures that the buyer will receive a clear title to the property. If there are any issues with the title, such as liens or easements, you can choose to proceed with the sale or withdraw.
The importance of contingency clauses in a home-buying contract cannot be overstated. They can allow you to mitigate risk when it comes to relatively unforeseen issues when you’re closing in on your dream home. Including contingency clauses in your home-buying contract and seeking qualified legal guidance before signing any binding agreement can help to better ensure a smooth home-buying journey and protect your interests along the way.
