The real estate seller/buyer contract is an amazing thing. The seller is moving on to new adventure, and the buyer is moving in to a new adventure. Both the buyer and the seller must agree to the terms, and their signatures imply they will follow through. Then, you notice it, a contingency.
A contingency is an additional request clause in a real estate contract that outlines the actions to be satisfied to bind that contract.
There are two important things to remember when dealing with contingency. First, there will be contingencies. Yep, there is never just one. The seller and the buyer, as well as the mortgage company or other entities involved in the contract, have the right to request specific actions be fulfilled to close the contract. Second, contingencies are for the protection of all the parties involved in the contract, working to catch problems in several areas of the complicated real estate process before the contract binds either party to the sale. Below are two examples of what types of contingencies may be included in your realty contract.
Home Inspection Contingencies
Many contracts include a home inspection clause. Inspections of the water and septic systems or for radon can tell the buyer how safe the home actually is or if the septic system is about to fail. Older homes may contain lead-based paints that are dangerous, specifically to young children. The home may be in a high radon area, which could lead to health problems for the new owner if this easy-to-fix but not inexpensive issue has not been detected.
Homeowners insurance is a valuable tool in any owner’s toolbox, but without an inspection, how will you know if issues such as synthetic stucco or polybutylene pipes may cause the home to not be insurable as well as bring on possible added expenses and repairs? Polybutylene pipes, also known as gray poly pipes, have been known to burst, leaving devastating water damage. Exterior insulating and finish system, or synthetic stucco, can harbor water and mold if not installed properly.
The financing game is never a sure thing, and the real estate market can be booming in one area and static just a town or two away. Many times the house may be perfect, but all the financials are not aligning with the stars. In these cases, several contingencies may be included in the contract to ease the process or cover issues that are not controllable by all parties.
The seller may include a “home of choice” clause that keeps the sale from going through until they have selected a new property. The buyer may include a version of this clause, having the closing be contingent on the sale of their current residence. Both parties may agree to include coinciding settlement contingencies allowing for the need that both the buyer and the seller must be in a position to close on other properties before the lender provides a loan commitment and the contract between them is binding.
The seller might also want to include a “back-up contract” contingency clause if the viability of an existing offer and its contract is in question. The back-up clause allows for the seller to be in a contract with you that goes into effect immediately if the first contract falls though. Basically, the back-up leaves you standing in line, waiting to see if you will get the property, but when the market gets hot, it is best to be at the beginning of the line than the end.
I could have discussed so many more examples, but that could get mind-boggling. In fact, not all contingencies have a category, and many times miscellaneous clauses are included. As in life, there is always something! The best way to understand the world of contingencies is to ask a trusted expert in the real estate field. If you are ready to buy or sell a home and want someone that can work through the complications, contact Belinda at Jacobson Realty and Home Staging today.
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