What is a Contingency and what does that mean for my real estate deal?
Virtually every real estate purchase and sale agreement has at least one Contingency written into it! Consider a Contingency as an ‘option to rescind’ or put even more simply, a way to insure that the buyer has a certain period of time to complete their own studies and/or research on the property they intend to buy!
What are some of the usual Contingency Periods you’ll see?
Most are very common such as an Inspection Contingency or a Financing Contingency. The ‘Contingency Periods’ as they are known, can be as short as a couple of day for an inspection or as long as 30 days (or the life of the agreement if not waived by the buyer) for the purchaser to get their loan documentation in order.
During these ‘Contingency Periods’ such as an inspection, the home buyer is entitled to enter the property and check to see if everything is in order.
During this time period, the buyer may also add other types of inspections to their contingency period such as a sewer scope (where a plumber sends a long camera down the sewer line to make sure there are no problems or potential blocking issues to name a few) or to get a specialist to look at a certain item like a roof or a foundation that may be outside the scope of their home inspector purview.
What other Contingency Periods could you find in your offer?
You can also find a variety of items the perspective homebuyer may attach to their offer. These may include:
Septic System –
Usually a fairly straight forward inspection where the Septic System is deemed to be in good working order. In some parts of the state where homes are on Septic, this may likely be a requirement of the lender before they will approve financing.
Well System –
Same as with the Septic, this is for those parts of the State where wells are still being used.
Feasibility Study –
In the case where you might be selling your property to a developer or builder, they very likely will attach a Feasibility Study as a contingency to the sale. Some feasibility studies will include if the property can be sub divided or if there is any adverse issues with the property that will prohibit the developer from building.
Home Sale Contingency –
This contingency is far more complicated! In short, this contingency is put in the agreement when a homebuyer is also selling their home and need the proceeds of that sale in order to complete the purchase. NOTE: This contingency requires strong understanding of the wording of the agreement.
Usually attached as part of the financing contingency. This is in place, for the most part, to protect both the homebuyer as well as the lender in the event the home does not appraise at the price indicated on the purchase and sale agreement.
Can you get out of the deal on a Contingency?
The purpose of a contingency is to make sure the home and the ancillary particulars such as your financing are in order so that when the homebuyer takes ownership, there shouldn’t be any surprises. That said, in some cases, if the inspector finds something that doesn’t allow quiet enjoyment of the property for the homebuyers or their financing is not approved, they can easily rescind within the specified contingency period of the offer without fear of losing their Earnest Money and/or future litigation.
If you have any additional questions about contingencies and how they can affect your real estate transaction, please feel free to contact me at the options below.
I am Passionate about Real Estate and eager to answer any and all of your most vital real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in todays Real Estate Market.
Janet Simons | Real Estate Broker | Mountain Valley Real Estate