You’re about to purchase your first home and couldn’t be more excited. That said, you’re new to the process and understandably nervous about unforeseen legal hiccups along the way. And it doesn’t help matters that as you read over the initial documents and disclosures, you notice a contingency clause (or perhaps two or three) buried into the fine print. If you’re wondering if these provisions are normal, the answer is yes, though they should be properly reviewed by your real estate attorney first.
That said, contingency clauses are a big part of any legally-binding contract and provide a way for one or both parties to legally exit the deal if certain conditions aren’t met. Let’s explore contingency clauses a bit more in today’s blog post.
Here’s How a Contingency Clause Works in Simple Terms?
Think of a contingency clause in real estate as one or several stipulations that must be satisfied for the deal to work. In other words, this home sale is contingent upon X, Y, and Z conditions being met. Those conditions could run the gamut. On a basic level, it could be that the appraisal must exceed a specific amount or that you have X number of days to complete an inspection or secure financing. If those contingencies aren’t satisfied, or a specific event does not take place, then the other party is released from the obligation, has the right to renegotiate the deal, or the deal is considered null and void.
There is typically a contingency clause in any contract, not just real estate. This includes matters related to employment contracts, noncompete agreements, government policies, pending cases, or another type of binding contract.
A few common contingency clauses you may know (whether real estate related or not) include:
- A formal job offer might be contingent on the applicant passing a drug test or background check.
- A contractor’s work might be required to pass inspection before they receive payment.
- Certain repairs may be required before the buyer agrees to take ownership of a property.
- The buyer has 14 days to inspect the property or secure financing.
- An athlete might be required to reach agreed-upon performance levels to receive additional incentives.
- A beneficiary might be required to graduate from college before receiving their inheritance.
In real estate, a contingency clause can be subject to a specific time frame, terms, or any need or concern that should be addressed for the deal to push forward. A contingency clause is typically attached to an offer to purchase real estate. It is also included in the real estate contract and must be written and clear enough for all parties to understand.
Christman Daniell Attorneys, has extensive experience in all areas of real estate law and are happy to answer any questions you might have. We represent buyers and sellers in commercial and residential real estate contracts, assist parties in negotiating contracts, advise clients on title and property matters, and represent residential and commercial real estate developers.
We also litigate disputes, including boundary disputes, contested appraisals, suits arising from breach of contract, condemnation proceedings, failure to close, title defects, breach of warranty, construction defects, liens, foreclosure, adverse possession, condemnation, and recording issues.
Please call Christman Daniell Attorneys, for your legal needs today!
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