When buying or selling a home, contingency is an important part of the process. It is a formal stipulation that protects the interests of both buyers and sellers. Contingencies enumerate particular conditions that must be met for the sale to be finalized, and if they are not fulfilled, the buyer or seller can back out of the contract without penalty.
Some common contingencies are:
- Financing - The financing contingency refers to the buyer’s ability to procure financing for the property. This could include the terms of the loan, including the interest rate, length and type of loan.
- Appraisal - The appraisal clause is necessary so the proposed property value can be substantiated for the lender.
- Inspection - A home inspection could reveal any issues or defects and the buyer can ask for repairs, or renegotiate the sale price.
- Buying or Selling of Property – Often, the sale may be contingent on the seller’s purchase of a new property or the buyer’s ability to sell his existing home.
- Attorney Review – The attorney review enables the buyer’s attorney some time to review the signed contract before it becomes official. The allotted review time varies from state to state.