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What is a Contingency Clause? 6 of the Most Commonly Used

 



What is a Contingency Clause? 6 of the Most Commonly Used


 


If you’re thinking about buying a home in Naples, or a property in another part of the Southwest Florida region, the process may seem daunting, but your real estate agent will guide you through each step. When it comes to a purchase contract for your potential new home, a contingency clause may be needed. Here’s what it means, along with six of the most common types of clauses.


 


What is a Contingency Clause?




A contingency clause makes the sale of a home contingent upon, or dependent upon, a certain condition being met. If that condition is not satisfied, then you (the buyer) or the seller can cancel the purchase contract. Both parties must agree to each condition that is established, and the contract won’t become legally binding unless each contingency is met.


 


6 Commonly-Used Contingencies




There are lots of contingencies that may be included in a real estate purchase agreement. Six of the most commonly used include: mortgage contingencies, home inspection contingencies, existing home sale contingencies, title contingencies, appraisal contingencies, and homeowners insurance contingencies.




Contingency #1. Mortgage Contingencies 


As a buyer, a mortgage contingency permits you to cancel your purchase agreement on a property if you can’t get a loan by a time period that’s specified in the contingency. If you aren’t able to get a loan in time, you can pull out of the contract without being penalized. The seller can place their residence back on the market.


Even if you’re a cash buyer, it’s wise to be aware of this contingency–especially if you decide to sell your property down the road. The buyer may need a mortgage loan and make use of this contingency.




Contingency #2. Home Inspection Contingencies


This contingency gives you, the buyer, time to have your potential new home inspected to verify that it has no significant problems. If a home inspector identifies serious defects with the property, and the seller refuses to correct them, you can cancel the contract.


Related: What Should You Expect During a Home Inspection?




Contingency #3. Existing Home Sale Contingencies


If you need to sell your existing home in order to be able to afford the purchase of a new one, this contingency makes it so that you can do so within a period of time specified in your purchase contract. If you aren’t able to find a buyer in time, you can terminate the purchase contract without repercussions.




Contingency #4. Title Contingencies


In order to transfer the title of a property to a buyer, a seller must own the property without issues like an outstanding lien or other kind of legal claim on the residence. A title contingency allows a buyer to perform a title search and question the status of the title.




Contingency #5. Appraisal Contingencies


If the appraised value of a home you want to buy turns out to be lower than the price you agreed to pay in the purchase contract, an appraisal contingency enables you to back out of the contract without losing your earnest money deposit. You may wish to renegotiate the sale price with the homeowner.




Contingency #6. Homeowners Insurance Contingencies


A homeowners insurance contingency is typically requested by a seller or mortgage lender and specifies that a buyer must acquire homeowners insurance on their prospective property. Without the required insurance, the seller or buyer can back out of the contract.


 


REALTORS® Alexandra Janz and Juergen Haeringer Are Your Premier Real Estate Brokers


At Alexandra Janz AJ International Group Naples, the team of Alexandra Janz & Juergen Haeringer, Broker Associates & Luxury Properties Specialists with William Raveis-Florida, LLC, help clients realize their dreams of purchasing a luxury home and basking in the glow of the Naples and Southwest Florida luxury lifestyle. Alexandra is not only an expert in the real estate market in Naples and Southwest Florida, but in international markets as well.




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