Most people who buy or sell a home are primarily focused on the obvious aspects of the transaction, such as the purchase price, the closing date, or whether they are finally getting the house they have wanted for months. Unfortunately, many people do not realize that some of the most important portions of a real estate contract are actually the contingencies contained within the agreement itself. If you are currently buying or selling a home, continue reading to learn more about the most common contingencies in home sale contracts in Florida and contact a Florida real estate lawyer from Ansbacher Law for comprehensive representation today. Here are some of the questions you may have:
What Is a Contingency in a Home Sale Contract?
Simply put, a contingency is a condition within a real estate contract that must be satisfied before the transaction may fully proceed to closing. In many cases, contingencies are included to protect buyers, though sellers may also benefit from certain contingencies as well. If a contingency is not met within the timeframe required by the contract, one party may have the right to cancel the transaction without facing serious financial penalties. Some of the most common purposes of contingencies in a Florida home sale contract are as follows:
- Allowing buyers time to secure mortgage financing
- Ensuring the property passes inspection
- Confirming the property appraises for the agreed-upon value
- Protecting earnest money deposits under certain circumstances
- Allowing parties to renegotiate terms if issues arise during the transaction
What Are the Most Common Buyer Contingencies?
There are several contingencies that appear in residential real estate contracts on a regular basis. Some are more common than others, however, generally speaking, the following contingencies are among the most frequently used in home sale transactions.
Financing Contingency
A financing contingency is perhaps one of the most common contingencies included in a home sale contract. This contingency is designed to protect buyers who require a mortgage loan to purchase the property. If the buyer is ultimately unable to secure financing within the timeframe stated in the contract, the buyer may have the right to terminate the agreement without losing the earnest money deposit.
Without a financing contingency in place, a buyer may still be legally obligated to proceed with the purchase, even if financing ultimately falls through.
Inspection Contingency
Home inspection contingencies are also extremely common. Though a home may initially appear to be in excellent condition, inspections often uncover hidden issues involving roofing systems, plumbing, electrical components, mold, structural defects, water intrusion, and more.
Generally, an inspection contingency may allow a buyer to:
- Request repairs
- Request a credit at closing
- Renegotiate the purchase price
- Cancel the transaction if significant defects are discovered
In many real estate transactions, inspection-related disputes become one of the primary areas of negotiation between buyers and sellers.
Appraisal Contingency
When a buyer is obtaining financing through a lender, the lender will generally require an appraisal of the property before approving the loan. The purpose of the appraisal is to ensure the property is actually worth the amount being financed.
If the property appraises for less than the agreed-upon purchase price, several things may happen, including the following:
- The buyer and seller may renegotiate the price
- The buyer may choose to pay the difference out of pocket
- The transaction may be canceled pursuant to the contingency
Unfortunately, low appraisals can sometimes delay or entirely derail a real estate transaction, especially in highly competitive housing markets.
Why Should Buyers and Sellers Review Contingencies?
Importantly, real estate contracts are legally binding documents, which means contingencies should never be casually overlooked or assumed to be “standard” language without fully understanding their implications. Though contingencies are common, the exact wording of these provisions can significantly impact your rights throughout the transaction process.
That is why it is often in a buyer or seller’s best interest to speak with an experienced Florida real estate lawyer who can review the agreement, explain its terms, and help ensure their rights are protected throughout the process. If you have additional questions or would like to speak with a skilled attorney about your circumstances, please don’t hesitate to contact Ansbacher Law today.