Contingencies are important because they protect the home buyer and home seller. Depending on the situation, they allow one or both parties to terminate the contract if the contingency is not met.
What happens to the home buyers deposit/escrow money can be directly affected by these choices. Will the home seller get to keep the buyers money even if the home isn't purchased?
The most common contingencies are:
Mortgage Contingency: Mr Seller I wish to purchase your home but it is contingent on me being able to get a mortgage
Inspection Contingency: Mr Seller I wish to purchase your home but it is contingent on inspections
Common Inspections when purchasing a home are:
- Property (electrical, plumbing, roof, structure, general condition of home)
- Wood Destroying Insects (usually called a termite inspection)
- Radon Gas
There are other inspection contingencies but the above are typical on many home purchases.
In addition, something specific can be added to the agreement of sale. i.e. the purchase is contingent on the sale and/or settlement of my current home. This is important to someone who needs the money from their current home in order to buy a new one.
When an offer is made on a property, the specific contingencies should be spelled out in the agreement of sale. Once the buyer and seller agree then everything moves forward.
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