What Is A Contingency? Contingencies are contractual requirements regarding fundamental aspects of the transaction upon which settling the contract is dependent. Because a home is an expensive and complex structure, it is often difficult or costly to address all issues prior to agreeing on the terms of a purchase or sale. The real estate industry uses “contingencies” to help outline the needs of buyers and sellers and to encourage accurate and clear communications during the transaction in an effort to reach an agreement. Although you should be able to depend on the expertise of your agent, it is critical you understand the importance of contingencies, the purpose of them and how agents draft them.
Why Are Contingencies Necessary? These requirements usually can’t be confirmed during the negotiation process due to time and cost constraints involved in satisfying issues like financing, inspections and appraisals. If certain requirements are miscommunicated, or not included in the offer but are necessary to either party, problems are likely to occur. This is true for both buyer and seller. The purpose of contingencies is to allow the parties to accept a conditional agreement prior to incurring the time and cost required to verify representations, investigate pertinent details or complete critical actions. This is an area where you must communicate clearly and read the contingency carefully to verify your conditions are understood. Click here to learn the details.
Let’s look at some specific questions sent in by DearMonty readers from across the country. Read more Q&A articles about the “Satisfying Contingencies” stage of the Home Buying process:
Reader Question: Today, we have fantastic technology. We have companies using algorithms that evaluate homes without even walking through the house. Yet we still have poor real estate appraisers. I want to refinance my home with the low-interest rates. I am working with one of the big players that lend across the country. I […]
Reader Question: I am purchasing a home. Lender appraisal (A) value came back $48,000 lower than the contract price. Sellers disagreed and argued it was a bad appraisal. I agreed to get a second opinion. Appraisal (B) came back $5,000 over contract price. The two appraisals are miles apart. I was shocked because I was […]
Reader Question: We signed a contract on a home. In reviewing disclosures, everything seemed ok. We found out a week later that the city water and sewer was confirmed to run under the house and through the middle of the back yard and also services three properties to the south. We also learned the water […]
Reader Question: Monty, we want to make an offer on a house. Our agent wrote up a contract with a financing contingency that says “subject to buyer obtaining financing.” We are wondering if that wording is enough. We asked, and the answer was “you either get a loan or you don’t.” Is our agent […]
What are home buying contingencies? Home buying contingencies are contractual requirements regarding fundamental aspects of the transaction upon which settling the contract is dependent. Because a home is an expensive and complex structure, it is often difficult or costly to address all issues prior to agreeing on the terms of a purchase or sale. The real […]