9 Most Purchase Agreements Are Contingent on Which Two Items
on February 14th, 2023 at %I:%M %pWhen it comes to purchasing a property, there are a variety of terms and conditions that can be included in the purchase agreement. However, there are two particular items that are commonly included in most purchase agreements as contingencies. These two items are the financing contingency and the home inspection contingency.
Financing Contingency
One of the most important contingencies in any purchase agreement is the financing contingency. This contingency states that the purchase of the property is dependent on the buyer obtaining financing from a lender. In other words, if the buyer is unable to secure financing, then they have the right to terminate the purchase agreement without penalty or loss of the earnest money deposit.
A financing contingency is necessary because most buyers do not have the full amount of cash required to purchase a home. They rely on securing a mortgage loan from a bank or other financial institution to finance the purchase. However, there are situations where a buyer may not be able to secure the financing they need. For example, if they have poor credit or a high debt-to-income ratio, they may be denied a loan.
Home Inspection Contingency
The second most common contingency in a purchase agreement is the home inspection contingency. This contingency allows the buyer to have the property inspected by a professional home inspector. The inspection is typically conducted within a specified time frame, and the buyer has the right to cancel the purchase agreement if the inspection reveals any issues or defects with the property.
A home inspection contingency is important because it helps protect the buyer from purchasing a property that has significant defects or issues. Home inspections can uncover hidden problems, such as a faulty roof, plumbing issues, or electrical problems. Without this contingency, the buyer may be stuck with a property that requires costly repairs and maintenance.
Other Important Contingencies
While the financing and home inspection contingencies are the most common, there are other contingencies that may be included in a purchase agreement. For example, a title contingency may be added to ensure that the property has a clear title and is free from any liens or other encumbrances. A seller disclosure contingency may also be added, which requires the seller to provide the buyer with a disclosure statement outlining any known issues or problems with the property.
Overall, the purchase agreement is a critical document that outlines the terms and conditions of the sale. Including contingencies, such as the financing and home inspection contingencies, helps protect both the buyer and the seller from unforeseen circumstances that may arise. As a result, it is important to work with a skilled real estate agent and attorney to ensure that all necessary contingencies are included in the purchase agreement.