The contingency clause is used to protect both the buyer and the seller throughout a real estate transaction. 

There’s nothing worse then learning that the home you’re selling has a severe defect. The following list of contingency options should be considered before you negotiate a home purchase or sale. With few exceptions, you should always include standard contingencies, or conditions in the purchase contract. You may also want to include contingencies that are unique to your situation. 

It’s important to understand that the real estate contract is designed to protect both the buyer and the seller in a transaction. If there is something unique about your transaction or situation, document it in the contract. 

In general terms, if the seller doesn’t satisfy a contingency, the buyer can cancel the contract. On the other hand, if the buyer doesn’t satisfy a contingency, the seller can cancel the contract and possibly keep the buyer’s deposit. 

Financing/Appraisal 

Buyer can back out, if loan and/or appraisal is not approved. 

Inspections

Buyer can back out, if inspection of property condition, pests, lead, radon levels or the neighborhood itself are unsatisfactory and if the buyer and seller can’t agree on remedies. 

Title 

Buyer can back out, if property title is unclear. 

Contingent sale 

Buyer or seller can back out, if buyer’s current home fails to sell within a certain time limit. 

Insurance 

Buyer can back out, if unable to obtain insurance. 

Disclosures 

Buyer may be able to back out, if seller fails to disclose such issues as earthquake hazard, flood hazard, lead (in homes built before 1978) or other material facts or defects about the property. 

Contract review 

Buyer or seller has the right to have the contract reviewed and approved by an accountant or attorney before sale can move forward.

Last updated on January 24, 2012 by Blake Roberts