There’s certain content that becomes dated, and there’s other content that remains a staple in our industry. Terms and concepts within the world of escrow definitely fall into the ‘staple’ camp.
Years back, we wrote an article about contingency. To-date, it’s still a popular conversation we have with clients, so we wanted to provide a recap of this very important information.
What is a contingency?
A condition in the Purchase Agreement that gives the buyer(s) the option to sever the contract with their deposit refunded if certain conditions are not met after their offer is presented.
What are some common contingencies?
- Building inspection
- Financing or mortgage
- Clean title
- The appraisal
What are some other types of contingencies?
- The seller must fix up the backyard by adding trees and flowers to the landscape.
- The buyer must be given a certain amount of time to sell current home before closing on new home.
How do contingencies work?
- Contingencies have to be fulfilled within a certain time period as agreed upon in the purchase agreement.
- Once approved, the buyer and seller must give a signed document to the other party that stating that the contingency has been satisfied.
Why are contingencies an important part of the purchase transaction?
- Eliminates any uncertainties over who is responsible for financial responsibilities if contingencies can’t or aren’t fulfilled.
- Protect both parties – buyer and seller – from surprises and sets out clear expectations for and from each party in the purchase transaction.
We hope that you found this information helpful!
Of course, please don’t hesitate to contact us if you have additional questions or if we can be of service to you.