Real Estate Contract Contingencies

Contingencies

As we move into a market where buyers have more influence in a negotiation, let’s look at how contingencies are handled in a more typical environment.
In a seller's market most sellers would not accept the contingency that the buyer must sell their home in order to purchase the new one. A potential buyer would be expected to already have their home listed with an agent and, ideally, have an accepted offer on their home.
Other contingencies that buyers previously had to forego are becoming more common again. For example, a buyer may make their purchase contingent upon their capacity to obtain financing. A buyer may also want to predicate his offer on the home appraising at or above the sales price. Since the appraiser is hired by the lender and is independent of the actual transaction, this is not an unusual request.
Most other types of legal contracts are fixed at the time of offer and acceptance. Both parties are expected to fulfill their obligations and if either attempts to renegotiate any point, the other party can withdraw.
Real estate contracts differ in that they contain clauses that allow renegotiation within limited areas. For example, a contract may require a buyer to get a home inspection within fourteen days. The buyer is allowed a certain amount of time to review the inspection and request the repair of any noted deficiencies. At this point the buyer and seller renegotiate that aspect of the agreement. The seller then decides to make the repairs or not. During this process the buyer must decide whether it is worth losing the house over the issue or not, and the seller must decide whether it is worth losing the buyer and putting the home back on the market.
Contingencies are a normal part of a real estate transaction, but only in areas specifically noted in the agreement. An informed reading of the contract will allow the best decision at each point in the negotiation.