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Whether you’re planning to buy a home in Pennsylvania or Nevada or any other state for that matter, you’d probably be going through a lot of paperwork. And you would have certainly come across a contingency clause while filing your agreement.
If you are yet to agree or are planning to buy a home, well luckily this article can be of great help to you.
What is a contingency clause?
Legally speaking, a contingency clause puts up conditions or actions for a real estate agreement to be binding.
A contingency is generally defined as any condition that either buyer or the seller needs to be met. If the contingency is not fulfilled, the initial contract stands void. And, subsequently, both parties can quickly exit the agreement.
What are the common types of contingencies?
Now that you have the gist of what contingency means and how it is involved in the whole home buying process, it is better you know about some common contingencies.
Appraisal contingency
An appraisal contingency protects the buyer’s earnest money if the property is not appraised at the subject price.
In many cases, the buyer chooses not to include this contingency. However, it largely depends on the buyer’s financial situation. Buyers usually cover up the appraisal difference from their personal funds.
Home sale contingency
Another common contingency is the home sale. It helps protect the buyer’s earnest money if they already own a property and wish to make the down payment using the money they receive from selling it.
Experts explain that houses for sale in Bucks County, PA, are usually sold between 30-45 days after being on the market.
Well, that’s pretty assuring that home sale contingencies are usually removed before the close of escrow.
Mortgage contingency
The next is a mortgage contingency. It is noteworthy that mortgage contingencies are more common than any other contingencies so far.
It means if the buyer cannot secure a mortgage within a certain period, the contract may stand void.
It is also noteworthy that mortgage contingencies are rare cases when the buyer may not receive their earnest money back. So, if you will use this contingency, make sure you are confident enough to receive the mortgage well in time.
Inspection contingency
Also known as a “due diligence contingency,” this clause allows buyers to step out of a contract if the home is not deemed fit for living,
Generally, the inspections are carried out within a specific time from entering into the purchase agreement.
That said, buyers can also choose from several inspections, including termite, roof, and pest inspection. On failing any of the inspections requested, the buyer may also negotiate with the seller for any additional discounts. Or they may also request the seller to get the necessary treatments and repairs done before title transfer.
The bottom-line
Long story short, contingencies are tools for buyers and sellers to negotiate prices and inclusions on the property. And as a result, both parties get what they want without any differences.
