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Preparing Contract Contingencies
Preparing Contract Contingencies
When writing your contract, there should be certain contingencies. This means writing clauses that allow you to have some evaluation of the home before it is purchased. It allows you to find out physical details about the home, sometimes hidden details without being required to purchase the home. These are questions that should be answered and if the answer doesn't satisfy you, you have no penalties in deciding to cancel the contract. Listed below are several common contingencies but each contract may have certain criteria, depending on your area, the price, value and age of the home, or other considerations.
Common Contingencies
The contract should explain what type of financing you expect to receive and should release you from any purchase obligation if you are unable to obtain your desired financing terms. You might add a clause explaining that it doesn't matter why the terms weren't reached, only that they weren't. This protects your privacy.
If you chose to do home inspections, or your financing requires it, the contract should include your rights to have inspections, dates by which they must be completed, and your ability to cancel if desired results aren't found. It should also explain in detail your rights to cancel the contract if needed repairs are more than you are willing to handle.
Consider contingencies allowing you to back out of the deal if there is mold, radon, or other toxins found. Input a contingency that lets you perform other inspections, required or not such as for termites or other insects. Consider adding a contingency for tests on water, sewage or septic systems and anything else that needs to meet specific public health standards.
Other Contingencies
Some places require that a survey be completed in order to determine the exact property lines.
Some areas do not have a public sewer system. You might want a contingency to ensure the proper type of waste system is installed.
If you are considering digging a well, you probably want to be sure that you own water rights before purchasing.
Use this when the appraisal must show that the home's value matches or exceeds its price. Pre-printed forms nearly always include an addendum that can be used to insert an appraisal contingency.
There should be some contingency stating that the title or deeds will be free of any and all liens before you have to purchase. You might also consider adding a line about no title/deed problems from previous owners.
Find out what easement rights you have - you might not want other people crossing your yard in order to get to other places.
Clearly define contingencies
If you decide to include contingencies based on radon tests, water tests or septic permit, you need to be specific about what requirements should be found. Simply stating that good results will enforce the contract or bad results will void the contract isn't enough. Explain in detail what type of permit you want, what results you're looking for or should be verified, what levels would be considered acceptable, etc. Do not leave any area open for interpretation or you may find trouble canceling a contract, despite being unhappy with test results.
You can make an offer that's contingent on the sale of your current home--meaning that you cannot act on the purchase until the current home is sold. Some sellers will accept such offers, some won't consider them. If they do accept your offer, the sellers will continue to aggressively market the property to buyers who can buy now. Some sellers will accept such offers, and some won't consider them. If you must sell your current home in order to purchase the home you'd like to contract on, you can add a contract contingency stating that you cannot purchase until your current home is sold. Some sellers will not even consider these offers. Other sellers will accept them, but you should be aware that they'll continue trying to sell their home to a buyer who can purchase immediately, and they'll probably have a contingency of their own stating that if offered a purchase contract, you only have a certain number of hours or days to remove your contingency or else the contract becomes void. This allows you to have first access, but doesn't harm the seller while they're waiting on your home sale.
For Sale By Owner Contracts
If you find a home that is for sale by owner, find a competent real estate attorney to look it over before you present it to the seller. Be sure NOT to use the seller's attorney because if you run into any problems, you want the attorney that will be looking out for your best interests and the seller's attorney will be looking out for the seller.
Every area has different laws, different rules, and different things that can be considered contingencies. If you're buying close to where you currently live, you probably already know much of what you need to know in order to include them in your contract. If there is anything you aren't sure on, be sure to contact either a buyer's agent or a real estate attorney for help. Although it's important to back yourself up, make sure not to include too many contingencies or unnecessary ones. It might make the seller wonder if you're serious or trying to find any possible out to the contract and then the seller might not chose to sell to you. Think things out clearly and prepare several drafts before you present your offer to the seller.
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