Buying a home is decidedly an exciting yet daunting experience. Whenever you are involved in a purchase of real property, there is always a lot to do and plenty that you will need to educate yourself about.
One aspect of real estate contracts that has always been important, but is garnering more attention lately due to the coronavirus pandemic (“COVID-19”), is the issue of contingencies in real estate contracts.
What is a Contingency?
In most real estate transactions, the buyer will make an offer that is “contingent” upon a number of things. For example, in a residential housing situation, the offer may be contingent on the house appraising at a certain price and the buyer getting a loan from the bank.
If the seller agrees, the parties will sign a contract. Once that contract is signed, both sides are bound by the promises they made. In other words, they are bound by the terms of the contract. They can’t get out of it…
The contract says they can.
Contingencies are events or conditions described in a real estate contract that allows (generally the buyer) the parties to get out of the contract.
Without contingencies, if the buyer refused or failed to go through with the deal, he would be in breach of contract and would have to pay the seller damages (often the “good faith” or “earnest money” deposit).
Three Important Contingencies.
There are a multitude of contingencies in any real estate contract, but here are 3 important ones.
- Financial contingency. This contingency essentially says that the sale of the property depends on the buyer getting a loan or mortgage in a certain or specific amount in order to purchase the property. If the buyer’s lender or bank denies him the loan, (i.e., he can’t get the money) then he is not obligated to purchase the property.
- Inspections. Residential purchase agreements are often made contingent upon the home passing various inspections (for example, a foundation inspection, a roof inspection, etc.). If the inspection reveals a problem, then the buyer can either get out of the contract entirely or try to negotiate a better price with the seller.
- Appraisals. Another common contingency in real estate contracts is that of the appraisal. If the home appraises at a value that is less than the purchase price, this contingency allows the buyer to terminate the agreement.
Contingencies are an important aspect of any real estate transaction. That’s why it is important that you understand what they are and how they work.
Real Estate Attorneys in Cumming, Georgia.
Since 2001, the Law Offices of Mark Weinstein has focused on all aspects of real estate law and litigation. We are located in Cumming, Georgia, but we serve clients in and around Atlanta, Marietta, Roswell, Sandy Springs, Kennesaw, Forsyth County, and a number of other counties in Georgia. Call us at 770-888-7707, or contact us here, or send inquiries by e-mail to: firstname.lastname@example.org.