Buying real estate is not generally a rapid process. People must spend weeks checking listings for properties that fit their needs. They must submit a bid, negotiate with the seller and then wait weeks to sign the final paperwork at a title company in most cases.
The offer made to the seller usually includes certain terms that help protect the buyer, including contingencies. Buyers indicate how much they agree to pay and also outline certain scenarios in which they may not complete the transaction. Contingencies are an important protection for those making offers on residential real estate.
What do contingencies protect?
Sellers who accept offers typically stop marketing their homes. They are at risk of delays and duplicate expenses if a transaction falls apart after they accept an offer. Earnest money can indicate a buyer’s sincere intent to purchase the property. It can also help compensate sellers for inconvenience for an unnecessary or frivolous closing cancellation.
Sellers can make a claim against earnest money deposited by the buyer if the buyer cancels the transaction. Real estate contingencies outline specific scenarios when the buyer can cancel without risking their earnest money.
Those who need to sell their homes while purchasing a new house often include sale contingencies. Financing contingencies are common as well, as people never know when they might lose a job and be unable to secure a mortgage. Appraisal and inspection contingencies are also helpful for many buyers.
Discussing a potential purchase with a real estate attorney can help buyers identify potential issues in advance and better ensure that their offers include appropriate contingencies. Custom offer and purchase agreement paperwork drafted with the insight of a real estate attorney can minimize the financial risk associated with purchasing a home.
