It’s one of those key words that scare people in Real Estate transactions. What the heck is a contingency and what does it mean to you as a potential homebuyer?
Very simply, a contingency (or condition) is a provision in a real estate contract that specifies the contract can and will be voided or cease to exist upon the occurrence of or non-occurrence of a certain event. They are built in to the Purchase Agreement contract to protect the seller and the buyer. Here are some of the standard contingencies you’ll encounter in the process:
Mortgage Approval-The standard contract will state that the transaction will only be completed if the buyer’s mortgage loan is approved with substantially the same terms and numbers as in the contract
Appraisal-The contract will also be contingent upon an appraisal for at least the amount of the selling price
Closing Date-The completion of the transaction is contingent upon closing on or before a specified date.
Inspection-The satisfactory completion of a home inspection.
Satisfactory Walk-through-The closing will happen if the buyer is satisfied with a final walk-through of the property the day of or day before closing. All requested repairs have been completed.
Sale of Another Home-Sometimes the buyer is only going to be able to close if they get the funds from the sale of their current home, which is usually under contract. The new deal is contingent upon that deal closing.
Either the seller or the buyer can add many types of contingencies to the contract and contingencies are common and normal in real estate transactions, but remember to always enlist the help of a licensed Realtor to represent you and your interest in any Real Estate transaction.