In the world of real estate, the term “contingency” can lead to a lot of confusion. Whether you’re buying or selling a house, it’s crucial that you understand what a contingency is, and how it might affect your real estate transaction. As home contract contingencies can cause an otherwise straightforward real estate offer to become complicated, you should seek expert advice from a real estate agent if you’re unsure of any terms in your sales contract.
Here are five must-know contingency facts for buyers and sellers.
Contingency Fact 1 — Contingencies Are Extremely Common
In real estate, a contingency is a condition that either the buyer or the seller must meet before the deal can progress and move forward. Due to the personal aspect of real estate, there are many different types of contingencies that you can encounter.
Although the term “contingency” can carry negative connotations in the real estate world, almost every real estate contract contains some sort of contingency. For example, during a real estate transaction, the inspection period allows the buyer to inspect the home and uncover issues they may not be aware of. The inspection is also a contingency in the contract because it protects the buyer and allows them to exit the contract if they need to after inspection.
Another common contingency used in real estate contracts is an appraisal contingency. An appraisal contingency states that if a home does not appraise to a predetermined value, the buyer can walk away without facing financial repercussions. This is why it’s important to discuss any sales offers you receive with your real estate agent.
Contingency Fact 2 — Contingencies Help Protect You
Home contract contingencies are typically added to a contract in order to protect one party. In many instances, contingencies protect both parties simultaneously. You could find yourself in breach of contract if a contingency isn’t met. This will often kill the deal, by making it impossible to close.
If you receive an offer that contains contingencies, you must understand the consequences before you accept it. This is especially important if you’re unsure what the contingencies mean. In this instance, you should speak to an experienced real estate agent who can explain your options to you.
Contingency Fact 3 — You Can Make An Offer On A Home With A Contingency
Although not a typical approach, you can make an offer on a home that already has a contingency. However, it’s essential to determine the existing contingencies and how they will affect your offer. For example, a contingency that states the buyer must sell their current home is more likely to fall through. In this instance, it might be beneficial to present a backup offer on the home if you really like it.
When putting an offer on a home with home contract contingencies, it’s crucial that you stay realistic. Getting your hopes up can lead to disappointment if the contingent contract is not released. In addition, you may have to demonstrate a lot of patience while waiting to hear any updates about the deal.
