What To Know About Having Real Estate Contingencies In Your Offer

One of the most important parts of any real estate offer, counter offer, and final contact are the real estate contingencies. Real estate contracts are not as simple as an asking price, an offered price, and a final contract. Instead, there are multiple layers, and often loads of contingencies that can make the final agreement more beneficial to either the buyer or the seller. One of the most important thigns to know about real estate is how the contingencies will effect you and the deal you are hoping to ultimately make on a property.

What is a Contingency?

Contingencies in a real estate contract are primarily a tool that is used for the buyer to be able to cancel the contract if the conditions of said contingency are met. These contingencies can relate to anything from the home having to pass an inspection to the buyers being able to secure financing at a certain interest rate. Other contingencies often relate to the buyers being able to sell the property they currently live in, the subject property appraising for a certain amount, or the subject property coming back with a clear title after a professional title search.

Can Contingencies Be Removed?

Since real estate contingencies are a tool that is most beneficial to the buyer, they can be removed, but only if the buyer does so in writing. As is the case with any contract, there must be a paper trail that proves that the contingency has been removed by the only person with the power to do so. One of the most important things to know about real estate transactions is that once a contingency has been removed, the buyer is no longer able to receive his or her earnest money deposit back.

Can Contingencies Be Waived?

There are times when the buyer can waive a contingency. Again, this process must be done in writing. Such an example of a waived contingency could occur if a buyer has an incredibly large sum of money that they plan on using as a down payment on the subject property. At that point, the lending institution may not require an appraisal to be done on the subject property, which nullifies the need for an appraisal contingency. If a buyer is making a full cash offer on a home, they can also waive the standard financing contingency, as there will be no financing involved. Working with a Realtor is the best way to ensure that no contingencies are being waived that may be needed later in the deal.

Notice to Perform

In the event that the contractual time frame for contingencies to be removed and they are still in the contract, the seller must issue the buyer a written “Notice to Perform,” which has to be acknowledged, also in writing, by the buyer. Such a notice gives the buyer 48 hours to remove the contingency in writing or cancel the deal completely.

Contingencies are a great tool that can protect one or both parties in a real estate transaction. Working with a Realtor who knows how to best utilize these contingencies is a great way to ensure that the transaction goes the way you want it to.

Are Contingencies Time Sensitive?

Real estate contingencies are generally time-sensitive options. In most standard cases, buyers have between 17 and 21 days to cancel a purchase contract if a written contingency has not been met. This serves to ensure that the sellers are not left with nothing to show for a month-long transaction if the buyers get cold feet near the end of the process. For instance, if there is a contingency that says that subject property must appraise for a certain amount but it fails to do so, the buyers may have 21 days to back out of the deal. They cannot wait for months after the fact and then decide not to buy the property because of that fact. If they do so, they would be in breach of their contract.