Spring is just around the corner and with the warmer season, buyers and sellers will be out and about exploring their options.
Every residential sales contract typically is filled with standard conditions that must be met for a sale to be finalized; i.e. the home must appraise or the buyer must secure financing within a certain timeframe. These are called contingency clauses. Though these are standard in every contract, there are a couple more clauses to be aware of.
In a perfect world, every buyer would have all the funds needed to move ahead with a home purchase regardless if they currently own a home. Though we do not live in the perfect world, there are ways to move forward with purchasing a new home while waiting for your home to sell – Contingency.
The most common contingency added to a contract is the sale of a current residence. This can be tricky for both buyers and sellers.
What happens when a home has an accepted contract with a contingency?
When a seller accepts a contingent contract, they still have the right to continue showing their home in hopes of getting a non-contingent offer. If they do get another offer, the buyer has 24 to 48 hours, depending on how the provision was written, to decide if they could drop the contingency and continue on with the purchase despite not having a pending contract on their home. If they cannot move on with the purchase, they unfortunately lose the home and have to re-start their home search.
What other less common contingency options could you see?
The seller could ask to make the sale contingent on purchasing another property or a specific piece of property.
Moving furniture early: With this contingency, you and the seller agree to allow you to move personal property in (or move in entirely) earlier than the seller anticipated. You may have to agree to pay the seller rent if you move in before closing, but it will spare you from putting your belongings in storage and finding temporary lodging. Most sellers and agents are reluctant to pursue this avenue because of the liabilities involved.
Homeowners insurance: To get your loan, you will have to obtain homeowners insurance. It’s not optional. However that insurance could cost far more than you expected. You can protect against this by making the purchase upon your being able to obtain affordable insurance.
The biggest thing to remember about contingencies is that they should be in the contract to benefit both parties. They also should have expiration dates; no sale can be contingent indefinitely.