Most of us have heard the word “contingency” and think we know what it means. In real estate, contingencies can make or break a deal. Let’s see how.
- a future event or circumstance that is possible but cannot be predicted with certainty. "a detailed contract that attempts to provide for all possible contingencies"
- a provision for an unforeseen event or circumstance. "a contingency reserve"
- an incidental expense. "allow an extra fifteen percent in the budget for contingencies"
Contingencies in real estate
When you make an offer on a home, you can specify certain conditions that must be met before the deal can close – these are called contingencies. You have to make sure you can actually get the loan (a financing contingency), that the inspection doesn’t show anything too crazy (inspection contingency), and that the appraised value is close to what you’re offering to pay (appraisal contingency). Those are just a few common examples. There are several other types of contingencies that you should discuss with your agent.
Money saving tip: If you’re in a bidding war on a home, sometimes it can help to shorten contingency periods or waive them altogether. You may not necessarily have to pay more money, just be more flexible.
Another common contingency is selling a current property. In recent years, the home sale contingency has become more prominent among homeowners looking to upgrade their current house. This contingency allows a buyer to back out of a deal if he/she can’t sell his/her current residence to someone else. Generally, the contingency will set out a time period for which the contract is in effect, thereby giving the buyer that amount of time to sell the other property.
While there are literally thousands of other possible contingencies that you might see or use in a real estate contract, here are some common ones:
- Termite Letter Contingency
- Lead Paint Test Contingency
- Deed Contingency (stipulates what type of deed is expected from the seller at closing)
- Radon Testing Contingency
- Mold Inspection Contingency
- Sewer Inspection Contingency
- Private Well Inspection Contingency
- Home Owner Association Documents Contingency
For more information on the use of real estate contingencies, contact a Tauber Real Estate Services Specialist by calling 561-623-5480.