Good question. All real estate contracts have contingencies. Oh. You want to know more? Okay.
The dictionary defines a “contingency” as an event or a circumstance that may or may not happen. In real estate, the contract defines the actions that will be taken should a common event occur. Not a great definition, so let me explain some of the more common events in real estate that would trigger a contingency.
The Inspection Contingency
Even though the standard contract calls for the sale of the property to be “AS-IS”, as a buyer you are allowed to have an inspection performed on the house. To learn about what happens during an inspection, I have written articles. If something serious comes up during the inspection, you have the right to either force the seller to correct it or you can cancel the contract.
The Mortgage Appraisal Contingency
If you are getting a mortgage, the bank will order an appraisal to ensure they do not lend more than the property is worth. If the property under appraises, you can either ask the seller to reduce the sale price or cancel the contract.
The Financing Contingency
If you are getting a mortgage, the contract is contingent upon you, the buyer, obtaining financing. If you cannot get approved for a mortgage, you cannot purchase the property and the contract is cancelled.
The Home Insurance Contingency
If, for some reason, you are unable to purchase homeowners insurance on the property, you have the right to cancel the contract.
The Home Sale Contingency
If you either are unable or unwilling to purchase a property unless you sell a previous property, the contract should contain this contingency. It usually states that if the property you are selling does not close, you cannot proceed with the purchase.
All of the above contingencies are very common in real estate contracts. There are other contingencies that can be added. Consult your attorney if your situation calls for something else. Or call me and I’ll try to answer your question.
Art Reiman – Realtor
732-598-7700