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3 common contingencies when closing on real estate

On Behalf of | May 23, 2024 | Real Estate Law |

Contingency clauses are something you should always include when signing to close on a property. It does not matter whether the property is residential or commercial. You need contingency clauses.

Their purpose is to allow you to secure the place while reserving the option to back out if needed. You can’t just back out because you find somewhere better. You will only be able to back out without penalty for the specific reasons you include in the agreement with the seller. Here are three popular contingencies:

A funding contingency

How are you going to pay for your purchase? If you need to secure a mortgage, there is always a risk the lender backs out at the last moment or raises the interest rates from the level you initially discussed. You might also have a property you need to sell, and if the chain breaks and the sale falls, it would leave you unable to buy the new place. A funding contingency can protect you against such events.

A survey contingency

You should always commission a thorough survey when buying a property. The professionals who carry them out are trained to spot things that may not be apparent to your eye. They might find a problem with the building or property that makes you think twice about proceeding. Your clause should allow you to negotiate the price or pull out entirely if a considerable issue is found.

A title contingency

Sometimes sellers are unaware of title issues with the property. Other times they know but try to conceal them. And in other extreme cases, they may not even have the right to sell the house, but are trying to scam you and the owner. A title contingency can free you to walk away if you discover any such issues.

For a contingency clause to hold when needed, it must be appropriately drafted. Taking legal guidance to ensure your closing paperwork is adequate is crucial.