March 18th, 2015 4:47 PM by Jackie A. Graves
Think of a contingency
clause as insurance. Once you find a home and make an offer, you hope
everything will go smoothly; but in case it doesn’t, you have a contingency
clause in place that allows you to back out of the contract without losing
Most agreements already
have a few key contingency clauses in place to protect against the bigger
things—such as a lower-than-anticipated home appraisal—but
there are contingencies that go beyond the norm. If you’re about to make an
offer, consider all of your options.
Some contingency clauses are commonly used when
making an offer. Some examples:
Home inspection: This gives the buyer the right to order
a professional home
inspection and back out of the
sale if major unreported damage is found.
Appraisal: The buyer won’t be obligated to buy the home
if the appraisal
value is lower than the asking price.
Mortgage availability: This gives the buyer time to find
financing for the home. If the buyer can’t find financing, either party can
cancel the deal.
You don’t have to
stick with the standard contingency clauses. Depending on your situation, it
may make sense to add additional clauses to the agreement. Some examples:
HOA rules: If you’re considering an area with a
homeowners association, it may be prudent to require a copy of the HOA
guidelines before you buy. HOA
fees vary and if the dues are high, your annual homeownership costs will go up.
Many HOAs also have rules on parking, landscaping, paint colors, and even
holiday decorations. If you aren’t happy with the HOA, you’ll want the option
to back out of the deal.
current home: If you’re trying
to sell your home before you buy another one, you may want to put a selling
contingency in place. If you’re unable to sell your current home
within a certain time frame, this contingency allows you to cancel
Moving furniture early: With this contingency, you and the seller
agree to allow you to move personal property in (or move in entirely) earlier
than the seller anticipated. You may have to agree to pay the
seller rent if you move in before
closing, but it will spare you from putting your belongings in
storage and finding temporary lodging.
A basic offer won’t
automatically contain any contingency clauses. While many
Realtors® include some standard clauses in every offer, you should work
with your agent to make sure you’re including contingencies for everything
you can anticipate before you submit your offer.
Once you’ve submitted
the offer, keep in mind that the seller may submit a counteroffer with his or
her own contingency clauses as well.
By: Angela Colley | To
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