How to Word Real Estate Contingencies in the US: Expert Guide for a Seamless Transaction

In the realm of real estate transactions, contingencies play a vital role in protecting both buyers and sellers. These contractual clauses outline specific conditions that must be met for the sale to proceed smoothly. However, effectively wording real estate contingencies can often be a daunting task. In this expert guide, we will delve into the intricacies of crafting real estate contingencies in the US, providing you with valuable insights on how to ensure a seamless transaction.

I. Understanding the Importance of Real Estate Contingencies: Real estate contingencies serve as safeguards, allowing buyers to back out of a contract without incurring penalties if certain conditions are not met. They provide buyers with the opportunity to inspect the property, secure financing, and review legal documentation before committing to the purchase. Conversely, sellers can include contingencies to protect themselves against potential buyer defaults.

II. Key Elements to Consider When Crafting Real Estate Contingencies:

Be Specific and Clear: To avoid any ambiguity, it is crucial to use precise and unambiguous language when drafting contingencies. Clearly state the condition that must be met, the timeframe within which it should be fulfilled, and the consequences if it is not.

Real Estate Contingencies Contingencies can include details such as the time frame (for example, “the buyer has 14 days to inspect the property”) and specific terms (such as, “the buyer has 21 days to secure a 30-year conventional loan for 80% of the purchase price at an interest rate no higher than 4.5%”).

Table of Contents

How do you write a contingency clause?

A contingency clause should clearly outline what the condition is, how the condition is to be fulfilled, and which party is responsible for fulfilling it. The clause should also provide a timeframe and what happens if the condition is not met.

What are examples of real estate contingencies?

Some of the most common real estate contingencies include appraisal, mortgage, title and home inspection contingencies. Many home buyers also include a sale of prior home contingency, which allows them to withdraw an offer if they are unable to sell their current home within a specified timeframe.

What is the wording for the sale of a home contingency?

Home Sale Contingency Example This offer is contingent upon the buyer selling their current property located at (Address) within X amount of days from the acceptance of this offer or any extensions signed by the buyer and seller.

Can a seller accept another offer while contingent?

Contingency with a kick-out clause That means the seller can continue to show the home and accept offers during the sale contingency period. If the seller gets a better offer, they'll allow the original buyer 72 hours to drop the sale contingency and proceed with the deal.

What is the most common contingency in real estate?

Home inspection contingency Home inspection contingencies are one of the most common home buying contingencies. According to NAR, around 80% of homebuyers include a home inspection contingency in their purchase agreement. Home inspection contingencies are one of the most common home buying contingencies.

Real Estate Development 101:

He/she who makes the least mistakes, wins

The corollary to my “complexity kills profits” tweet.

The development process is chock full of surprises, even for the skilled veteran. All kinds of examples: the city planner told you it was OK to build…
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How do I make a contingent offer on a house?

When a buyer finds a property they want to purchase, they can write a real estate contingency clause into the offer they make on the home. After the offer is made, it's up to the seller to either accept the contingent offer, reject it or make a counteroffer that eliminates the contingency.

Frequently Asked Questions

What are contingencies in real estate?

A contingency is a clause that buyers include when making an offer on a home that allows them to back out of buying the house if the terms of the clause aren't met. Without a contingency in place, buyers risk losing their earnest money deposit if they decide not to purchase the home after making an offer.

What is an example of a contingency in real estate?

For instance, if a seller offers a certain price and you, as the buyer, say the price is fine (provided the home inspection comes back clean), you have made a contingent real estate contract. In this case, the sale of the house depends on the inspection not having problems defined in the contract.

How do you write a contingency offer?

Making a contingent offer on a home Think of a contingency as an “if-then” proposition. For example: If the appraised value of the property is lower than the purchase price, then I can ask for a lower price or get out of the contract.

FAQ

What are examples of contingencies?: What Is a Contingency? A contingency is a potential occurrence of a negative event in the future, such as an economic recession, natural disaster, fraudulent activity, terrorist attack, or a pandemic.
What is a normal contingency in a real estate contract?: Some of the most common real estate contingencies include appraisal, mortgage, title and home inspection contingencies. Many home buyers also include a sale of prior home contingency, which allows them to withdraw an offer if they are unable to sell their current home within a specified timeframe.
What is an example of a common contingency clause in a purchase agreement?: Homeowners insurance contingency This clause stipulates that the buyer must apply for and obtain homeowners insurance on the property. If they can't get the necessary insurance, either party can withdraw from the contract. This is often requested by either the seller or the mortgage lender.