It is common for real estate deals to have special clauses known as contingencies as part of their terms. These contingencies are conditions that need to be met before the deal can go forward, and the transaction will be canceled if one or both sides cannot meet their requirements. Here are five important contingencies you may see in your real estate transaction:
- Financing requirements
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- One of the most common contingencies seen in real estate contracts is a requirement to obtain pre-approval for a mortgage. This requirement exists for two reasons: first, it ensures that the buyer will have the money to pay for the transaction. Second, it helps keep the process honest, since you can rely on the mortgage lender’s screening process to some extent to filter out bad actors.
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- Appraisal requirements
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- Another common contingency is that the property needs to undergo an appraisal before the real estate transaction can close. An appraisal is an evaluation of a property’s estimated value based on the evaluation of an independent expert. This is meant to protect a buyer from putting down more money for a property than it is actually worth, which can happen if the bidding for a property is particularly fierce.
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- Inspection requirements
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- Another one of the most commonly seen contingencies is the requirement for a property to be inspected before it can be sold. A home inspection can help identify potential problems with a property, including the presence of pests like rats or roaches, structural defects, issues with mold or mildew, or even potential code violations. Typically, a seller who tries to sell a home with serious defects may either need to foot the bill to repair these defects, or else expect the buyer to back out of the contract.
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- Title contingency
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- Not all the potential problems with a property lie in its physical condition, however. Title defects can be just as disastrous for any real estate transaction, since a property with a defective title cannot normally be legally sold. That is why most real estate contracts have contingencies requiring a title search to be performed, which can identify these defects and allow the seller to cure them.
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- Insurance requirements
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- Finally, it is common for real estate contracts to have contingencies requiring the buyer to obtain homeowners insurance for the property. This is meant to protect against potential damage the property might suffer from unpredictable events like major storms, fires, or burglaries. If a buyer cannot obtain the necessary insurance, for whatever reason, that may lead to the transaction being canceled.
For more than 50 years, the New York lawyers at Elovich and Adell have represented clients like you in real estate cases. Our attorneys, conveniently located in Long Beach, handle personal injury, real estate, commercial transactions, criminal defense, and labor and employment claims all across New York State. For a consultation, please call us at 516-432-6263 or visit our contact page for more information.
