Contingencies on a Contract

Purchasing a home always involves reading through the contract and signing on the dotted lines. Most people that purchase a home, surprisingly do not read through the whole contract. They just seem to trust the fine print and the person guiding them through it. Most contracts are pretty standard and most people have a general idea what it contained. When reading through a contract, it is a good idea to know not only what the contingencies are, but also what they mean.

In every contract, there should be an attorney review. Typically the period is 3-5 days on a standard contract. This period is intended to give the buyer an opportunity to secure an attorney and have the attorney look over the contract. The attorney has the right to accept the contract as is or write in some modifications to the contract. The contract is still considered an offer at this point so if they modifications are not accepted then the offer becomes null and void. It is always a good idea to have an attorney review the contract before moving forward on a large purchase such as a home. This review period is put in place to protect the buyer and also to allow the buyer to rescind on the offer if need be.

Another contingency that can be found on a contract is the financing contingency. The amount of days the buyer has to secure a loan can vary per contract. The buyer has the responsibility to try to not only get pre-approved but also obtain a loan commitment letter as well. This loan commitment letter locks in a rate for a guaranteed period of time and also proves the buyer can qualify for the purchase of the home. If the buyer is unable to obtain financing for the home than the contract becomes null and void and all earnest money (if any) is returned.  This contingency is put in place to protect the buyer and the seller.

The inspection contingency is not found on all contracts but it is a good thing to have on a contract. Inspections can make or break a deal. If the inspection does not go well then the buyer and seller have a few options. They can come to an agreement to either fix the problems or take more money off the offer so that they buyer can fix the items on their own or If the buyer does not want to fix the issues or the problems are too serious, than again the buyer has a right to rescind the offer.

There are a few other optional contingencies on a contract, such as a house to sell contingency. This is put in place if a buyer has to sell their home before the purchase of the new home. If someone else is interested in the property and they put an offer on the place without the house to sell contingency, then the buyer with the contingency typically has 72 hours to purchase the home.