CONTINGENCIES IN REAL ESTATE CONTRACTS
This contingency protects the buyer to ensure the property is estimated at a minimum, indicated amount. If the property is not valuated for at least the specified amount, the transaction is closed and the money is given back to the buyer. After the buyer receives the notice of appraised value, he or she may opt to push through with the purchase even if the assessment is lower than the stated amount. Hence, the seller may have to reduce the amount. The clause also states the release date, on or before the buyer must raise his or her concerns with the appraisal to the seller. Otherwise, the deal is considered finished and the buyer will not be able to halt it.
Also known as mortgage contingency, the clause renders the buyer time to apply for and secure financing for purchasing a house. In the event the buyer fails to obtain financing from the bank, mortgage broker, or other institutions, he or she can cancel the contract and reclaim his or her money. It states a particular number of days the buyer needs to obtain funding, or he or she waives the contingency and will be forced to buy the property even without any financing.
House Sale Contingency
It is often easier to sell before purchasing another property, but financing and timing do not turn out as planned. Under this contingency, buyers are given a specific amount of time to sell their existing houses to fund another property purchase. The buyer can terminate the contract without facing any legal consequences if an existing home has not been sold for at least the asking price. However, the seller holds the right to end the contract if the buyer’s property is not sold with the given number of days.
Protecting buyers, the clause gives them right to have the house in question to be inspected within a certain time period, usually five to seven days. The buyer can negotiate repairs, request additional inspections, or terminate the contract, depending on the findings by the home inspector. An inspector looks into the property’s interior and exterior. Then, he or she formulates a report outlining any issues unveiled during the process. In some instances, a cost of repair contingency is incorporated on top of the inspection contingency. This provision sets a maximum amount for immediate repairs. The cost of repair contingency is based on a specific percentage of the sales price, typically 1% to 2%. The buyer may opt to end the contract if the repairs will exceed the maximum amount.
The clause aims to protect sellers against a house sale contingency. Although there is a house sale contingency in the contract, sellers can include this provision, which says they can continue marketing the property. The seller gives the current buyer a particular number of days, usually three days, to remove the above-mentioned contingency and retain the contract should another qualified buyer surface.
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