The
contingencies in your Pensacola real
estate contract refer to the conditions that must be met before the closing
process can start. These conditions can include inspections, insurance, and
financing matters, among others. Keep in
mind that contingencies are important for home buyers because these provide an
out in case the deal doesn’t push through as planned.
The
Workings Behind Contingencies
You, the
buyer, and the seller will likely both ask for a number of contingencies to be
included in the written purchase contract. This is understandable considering
that both parties want to cover their backs in case the deal falls
through. You can also use a standard
contract used by your realtors since most of the contingencies are already
covered in it.
Keep in
mind, too, that the inclusion of the contingencies should be made regardless of
the location of the real property. You
may have, however, unique contingencies for a Pace
Florida real estate property
as against a Navarre FL real estate transaction. This can
be attributed to the unique market conditions in each place even when both are
in the same state.
One of the
most notable inclusions is the time period allowed between the contract signing
and the deal closing, known as escrow in many states. During the escrow period,
you and the seller should work toward the compliance of the agreed
contingencies. These can include scheduling inspections, securing loans, and
getting documents, to name a few.
What
happens when one of you fail to deliver on an agreed contingency? You have two
options – renegotiate or call off the transaction. You have to carefully
consider the pros and cons of each option especially when there’s so much money
at stake.
The Types
of Contingencies
There can
be as little or as many contingencies as you want on your real estate contract.
You and the seller have to agree on these contingencies for the transaction to
move forward further. The common
contingencies include:
·
Buyer’s inspection contingency. You want to
be satisfied with the home inspection’s results before closing the deal.
·
Financing contingency. You have to prove to
the seller your ability to actually get a loan for financing the property
purchase. Before the Great Recession, a pre-qualification letter from a lender
was sufficient for the seller to close the deal. But times have changed and a
financing contingency is considered a must on the contract.
·
Insurance contingency. You want to ensure
that, indeed, the house can be insured. You may just find that it cannot be
insured because of various issues, such as the presence of toxic mold and the
high risk of natural disasters.
You can
also add unique contingencies of your own. You may, for example, add that the
purchase of the home will only push through when you have sold your old home.
Regardless of the contingencies included in your contract, you have to
carefully consider the impact of each one on the deal.
