What are contingencies?
Contingencies are procedural measures taken during the contract drafting that aim to protect both the buyer and a seller of a home. When buying a home, buyers are exposed to several risks. Buying a house doesn’t come with a return period if you’re unhappy with the product, so to speak. It’s not online shopping. Once you commit and sign the final papers, you’re stuck with the house, whether you like it or not. Contingencies work for you, ensuring that you are safe from many issues, such as financial backing failures, and they work for both the buyer and the seller.
How contingencies work?
A house purchasing contract takes weeks, even months to perfect and have it reach a final version. Contingencies go into the contract over the course of these weeks, and they are often renegotiated or altered. This period of back-and-forth negotiating is referred to as “escrow”.
During escrow, both parties strive to meet contingencies or have them completed and removed from the contract. You need to keep the other member(s) or the contract aware of any progress made, such as a loan coming through.
If issues arise and contingencies aren’t met (which, in many cases, does tend to happen at some point), you can call off the entire deal or go into further negotiations with your buyer or seller. Don’t expect everything to go perfectly right from the start, instead, focus on solving issues as they arise.
What do contingencies cover?
There are a large number of contingencies that can go into a contract. Some are standard and will appear in almost any transaction papers, while some are more case-specific. It’s not a problem if you have more contingencies specified than the usual norm, as long as you feel these are necessary and justified. You are not limited to a certain number.
Financial contingencies are the most common. These are especially important nowadays, following the financial crisis of the last few years. Up until now, there really weren’t any issues in securing a...