19 Feb What are the most common contingencies in a real estate contract?
What are the most common contingencies in a real estate contract?
It is common to have contingencies in a real estate contract. They are primarily in place to protect the buyer’s interest in a real estate transaction. What are those most seen?
1. The inspection contingency is the most used in our Twin Cities real estate market. The inspection contingency allows the buyer to perform an independent third-party home inspection. If hazards are found they have the legal ability to ask to have the sellers repair the issues or provide compensation or a decrease in price for the buyers to address them. Important note – it is not required the seller agree to repairs or compensation and the contract could then be canceled.
2. The financing contingency is the next most seen. This protects the buyer in case they cannot get financing because of an unknown finding or lose their job. Normally we see full loan approval a week before closing in so everyone can be assured the closing will take place.
3. Another common contingency is the purchase subject to the buyers selling and/or closing their home. In this seller’s market the contingency that a buyer must sell their home is not commonly seen or accepted by sellers. Many buyers sell their home first before submitting an offer, so they just need to close on their home to quality to buy another.
4. In rural communities it is common to have septic and well contingencies. Seller usually must supply to the buyers a current septic certification and a well test that is in the safe EPA range.
5. Many single-family developments and almost all condo and townhomes have a homeowner’s association. Also known as a HOA. In Minnesota you have 10 days of receipt to examine the budget, current financials, by-laws, and covenants. If the buyer is uncomfortable with any of it, they can back out of the purchase and get their earnest money back.
Those are the most common contingencies in a real estate contract. If you have any questions about these please just call me. I am always available to answer your questions.
Look for more articles and videos in the future on different aspects of Minnesota real estate and our state of Minnesota.
Real estate is a wonderful investment!