MAIN CONTINGENCIES IN A PURCHASE CONTRACT
How do you write a contract so that yours is the one that gets accepted? The goal is to find out what’s important to the seller and accommodate as much of what they want as possible, so that on the places that you’re not aligned, they have fewer terms to object to. Here are a few tips to keep in mind:
Inspection Contingency: also called a “due diligence contingency”, gives the buyer the right to have the home inspected within a specified time period, such as 5-7 days. It protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional home inspector.
Appraisal Contingency: protects the buyer, used to ensure a property is valued at a minimum, specified amount. If the property does not appraise for at least the specified amount, the contract can be terminated and the earnest money, in many cases, is refunded to the buyer.
Financing Contingency: also called a “mortgage contingency”, gives the buyer time to apply for and obtain financing for the purchase of the property. This provides important protection for the buyer, who can back out of the contract and reclaim his or her earnest money in the event he or she is unable to secure financing from a bank, mortgage broker or another type of private lending.
House Sale Contingency: Although in most cases it is easier to sell before buying another property, the timing and financing don’t always work out that way. A house sale contingency gives buyers a specified amount of time to sell and settle their existing homes in order to finance the new one.
REFERENCE: Investopedia Blog
