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Contingency Clauses 101

by Carrie Ammons 01/07/2019

If this is your first time buying a home, you might feel a bit intimidated by the purchase contract. Contracts are often filled with industry and legal jargon, making them difficult to understand for the average buyer and seller.

Contingencies in particular give some buyers cause for concern because their contract depends on the contingencies being fulfilled. However, in most cases contingencies are pretty standard and only serve to protect the interests of both the buyer and seller during a real estate transaction.

In today’s post, I’m going to give you an introduction to contingency clauses and break down some of the most common contingencies you’ll find in today’s real estate purchase contract.

Contingency clause definition

Simply stated, a contingency clause is a statement within a contract that requires a certain event takes place before the contract is considered legally valid. As a result, contingency clauses are used to cancel or invalidate a contract if certain conditions aren’t met before the sale is made final. So, if one party fails to meet the obligation of the contingency, the other party is no longer bound by the contract (or required to buy or sell the house).

Contingencies can get confusing when they are vaguely worded in the contract, making them difficult to interpret. In these cases, a court may decide the specific meaning of the clause or determine that it is too vague to be legally upheld.

The other instance in which contingency clauses can be confusing is when a party includes a contingency that is atypical for a real estate purchase contract. Buyers and sellers alike should be wary of unusual contingencies.

The main contingencies

  • Appraisal contingency.

  • Financing contingency.

  • Inspection contingency.

  • House sale and kick-out contingencies.


About the Author

Author
Carrie Ammons

After more than 20 years in education I chose to transition to real estate and focus on providing outstanding service to my clients.  As an educator at heart, I will help you through the process of purchasing and/or selling your home. I know what an important decision this is and I look forward to guiding you through each and every step.  

I am here to serve you.  I want my clients to have a great experience with their transaction.