Types of contingency clauses in the real estate contracts

A contingency clause defines a condition that has to be met in future to execute the contract. If it is not happened the contract will be canceled, if happened the contract will be remain in force to execute. The contingency should be accepted by both the parties that is, the buyer and the seller of the real estate property. These can be written for any concern and need. The following are the most commonly used contingencies in the real estate buying contracts.

• Appraisal contingency: If the buyer is taking the loan, needs appraisal. Sometimes the buyer may get low appraisal than expected. In these cases the appraisal contingency will be helpful. The contingency used to write for a certain amount as minimum appraisal amount. If the buyer does not get that amount, the contract will be terminated. The earnest money from the buyer refunded in many cases. If the buyer interested to buy the property, will have the chance to purchase the property within a specific days after the appraisal notice issued. Alternatively, the seller is ready to give for the appraisal amount; the closing process will be started.

• Mortgage contingency: The mortgage or the financing contingency will give the time to the buyer to get the finance to purchase. While writing the contract, in this contingency some number of days specified for the buyer to obtain finance. If the buyer cannot obtain finance from the lender during this period, the contract will be terminated, or the time can extend if the seller agreed. The buyer can claim his or her earnest money if the financing is unable to secure.

• Due diligence: The due diligence or the inspection contingency provides the right to have home inspected to the buyer. It should be within a specific time, usually five to seven days. Therefore, the buyer can appoint a home inspector for inspection. Based on the inspection report, buyer can take the purchase decision. If there are any issues found in the inspection, can disapprove or negotiate for the repairs.

• House sale contingency: If the buyer has a home and he or she needs to sell that one to settle the amount for the new one, this clause is used. In this clause, specific time is allowed to the buyer to sell the existing house. If not sold, the buyer can withdraw from the process without any legal consequences. In these cases, the seller can add the kick out clause in the contract, which allows him to continue market the house to others. If he found a new buyer, seller give specific time to remove the contingency. If the existing buyer is not keep the contract alive, the seller can sell to the new buyer.

While writing a contingency, be cautious with the time factor, because it plays a key role to get the things done. Otherwise you may lose both money and time. An experienced real estate agent can guide you properly along this process.