If the contract is finalized, it typically takes 30 to 60 days until closing. However, as life doesn't always go as planned, despite thorough preparation, there may be unforeseen circumstances that prevent the contract from proceeding. Therefore, buyers and sellers often include contingencies in the contract, specifying aspects beyond their control, so that if the contract is unexpectedly terminated, there is no liability for damages on either party without mutual agreement.
So, what are some common contingencies?
Our standard contract includes only a few of the most common contingencies. However, the contract can be personalized significantly depending on how both parties agree. In other words, you can ask the other party about any specific conditions you desire.
One of the most memorable contingencies I've encountered was "if the daughter doesn't get married by XX/XX and the house is left with only two occupants." While the daughter was already engaged, from the seller's perspective, if the daughter's marriage fell through and they still needed a big house, the condition was that the house couldn't be sold.
Another unique contingency was where the seller could indefinitely postpone closing until they found their next home. In this case, I was representing the buyer, and ultimately, the buyer found another home, causing the initial contract to fall through.
To reiterate, if you have specific conditions, you can certainly ask the other party and obtain their agreement. Once an agreement is reached, if the contract is terminated due to that specific condition, it is not your responsibility.
Now, what are the most common contingencies that appear in the contract?
Loan Contingency:
This is placed by the buyer, and it states that if the buyer has completed all procedures to obtain a loan but fails to secure it, it is not the buyer's responsibility to fulfill the contract.
Sellers often prefer cash buyers because they don't have this finance contingency. In other words, from the seller's perspective, having a cash buyer reduces a significant source of uncertainty.
Contingencies upon Sales and/or Closing of Real Estate (Home Sale Contingency):
Sometimes, buyers need to sell their current property to finance the purchase of a new one. In such cases, the buyer may place a home sale contingency, stating that the closing of the new home is contingent on selling a specific property. If the buyer's property doesn't sell and they cannot proceed with the contract, it is not the buyer's responsibility.
This is often a challenging condition from the seller's point of view. Therefore, if you receive an offer with such conditions when selling your home, it's advisable to work closely with your realtor to analyze the market and minimize risks.
If you have additional questions, please leave them in the comments, and I will consider addressing them in the next blog.
Wishing you a great week!
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