Webster Dictionary defines contingency as: “dependence on chance or on the fulfillment of a condition;” This definition helps us begin to understand what contingency means for a real estate transaction. Could you imagine buying a home without the opportunity to have it inspected, appraised or checked for termites? Hopefully you can’t! A contract should include contingencies for items like inspections, appraisals and loans.
A contract is a promise. In real estate it is a promise between the buyer and seller- the buyers to attain financing for the purchase of the property, conduct inspections with in the agreed upon time frame etc., and when closing day comes the seller will transfer the property in the same condition it was in at the time the contract was signed.
Here are a few common contingencies you may find in a real estate contract:
* Appraisal- If the buyer is purchasing the home with a loan expect there to be an appraisal contingency. The lending institution the buyer is using wants to be sure the home is worth what is being paid for it.
* Home Inspection- This is to check the condition of the property.
* Termite Inspection- To make sure there is no unseen damage from termites.
* Financing- to ensure the buyers are not stuck in a contract after finding that they were not approved for a mortgage.
Remember: Contingencies come with deadlines! If you were to miss a deadline… there is no getting it back. Be sure to read a contract carefully and consider if the deadlines are actually doable, if not, work those details out before the contact is bound. This is great advice for both buyers and sellers as it helps insure that the process from contract to close goes as smoothly as possible.