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Real Estate Contingency

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What are Contingencies in a Home Purchase Contract?

Contingencies in a home purchase contract are conditions that need to be met before the final sales closing can take place. They operate much like “escape hatches”, allowing the buyer to walk away from the deal if the contingencies aren’t met. 

In most real estate contracts, there are usually several weeks in between the signing of the contract and the actual closing of the sale. During this period, also known as escrow, most if not all of these contingencies are expected to be fulfilled. If all contingencies are not met by the final closing, either party may have a right to cancel the purchase contract.

What are Some Common Examples of Real Estate Contingencies?

Some examples of contingencies that commonly occur in a real estate contract involve:

  • Disclosure: After a seller accepts an offer for the property, the seller has a short period of time to disclose any material facts about the property. Disclosure requirements vary from state to state but most real estate companies provide the buyer with a disclosure form to protect themselves from potential litigation even if not required by law. Typical disclosures include: previous improvements, existence of pets, termite problems, neighborhood nuisances, defects, existence of property liens, etc.
  • Financing: Real estate sales are often contingent upon the buyer being able to secure financing such as a mortgage loan, with which they will purchase the property.
  • Inspection: Most contracts provide the buyer the right to have a building inspector evaluate the property for any potential problems, defects, or zoning violations.
  • Insurance: Many purchasers request an insurance contingency in the real estate contract. This is especially common in areas that have histories of environmental liabilities like hurricanes, mold, or earthquakes.
  • Improvements: This is an agreement regarding the ability to make improvements or renovations on the property. Typically, more common in commercial properties.
  • Sale of Your Current Home: If you already own a home and are expecting to use the proceeds from its sale to help purchase a new home, you may want to insert a condition that the purchase of the new home is contingent on the closing on a sale of the older property.

There may be several other different kinds of contingencies in a real estate contract. These will depend on the needs and abilities of both the buyer and seller in the deal.

Legal Disputes Involving Contingencies?

Most legal disputes related to contingencies arise when either negotiating the terms of contingencies in the purchase agreement or if one party fails to meet one of the contingencies after the purchase agreement is signed. If a dispute arises regarding the terms or conditions of the purchase agreement, the parties are generally bound by whatever dispute resolution process is indicated in the purchase agreement. This may require the parties to resolve the matter outside of court.

Do I Need a Lawyer for Help with Real Estate Contract Contingencies?

Buying property is generally a significant financial investment. Contingencies in a real estate contract are important for securing the interests for both buyers and sellers. Before signing a purchase agreement, it is important to consult a skilled real estate attorney to safeguard your investment. Your real estate lawyer can identify important conditions to include in the purchase agreement and help ensure that the conditions are properly fulfilled. In addition, if a dispute arises, a real estate attorney can maintain a record of the purchasing process and represent your interests in court.

Photo of page author John Kirby

, LegalMatch Legal Writer

Last Modified: 07-12-2017 02:33 PM PDT

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