Home Sale Contingencies Impact On Property Deals

Home sale contingencies give homebuyers a fixed time duration to finalize the deals of their existing homes. This enables them to finance their new homes. Property sale contingencies protect consumers if they cannot sell their homes within a defined time period. They can retract the contract without facing any legal charges.

Purchasing a house can be an experience of mixed emotions. You may be excited about living in a new home but would be nervous about the terms of the purchase. Home sale contingencies are tailor-made for such situations, providing legal protection to the contract parties.

Some common real estate contingencies encompass appraisal, mortgage, and inspection contingencies for residential properties. Potential buyers leverage home sale contingencies to give them sufficient time to sell their existing residential properties. If they are able to sell their houses, they can proceed with the contract agreement. They can withdraw from the contract if their homes are unsold within the specific timeframe mentioned in the contract clause.

In this article, we'll explore the role of contingencies in negotiating the purchase terms, focusing on home sale contingencies.

Defining Home Sale Contingencies

Property sale contingencies are provisions included in real estate contract agreements. These contingencies enable buyers to retract the contract if they do not close a deal for their existing homes.

A typical home sale contingency example entails a buyer given a duration of 1-3 months to sell their existing house. This is ample time to wait for the right offer and seal the property deal. It enables them to proceed with the contract agreement of a new home.

Home Sale Contingency Example

Imagine that you're a homebuyer who has just found their dream house. However, you realize that you need to sell your current dwelling place before you can buy that new home. You can prepare an offer for the seller, including a contingency clause of selling your existing home within sixty days.

If the seller accepts the offer with the home sale contingency provision, you can list your current home for sale. Unfortunately, after 60 days, you still haven't received any offers on your home. Using the contingency clause in your bid, you can walk away from your offer without incurring any penalties.

The Role of Home Sale Contingencies in Negotiating Purchase Terms

The legal protection provided by home sale contingencies is critical in negotiating the real estate contract terms. Both parties want to protect their interests and minimize their risks when negotiating a real estate contract. Contingencies serve these interests by delineating particular provisions requiring compliance before the sale's completion.

Home sale contingencies give buyers the freedom to leave the offer table if there's a violation of the contract clauses. This safeguards their investments and keeps them safe from financial penalties and losses.

However, the home sale contingencies also give the sellers some comfort. The provisions reassure the sellers about the buyers' commitment to finalizing the sales. The contingency also gives sellers sufficient time to meet the conditions mentioned in the sale contract.

Exploring the Contingency Types

A home sale contingency is not the only contingency type that can be a part of a property contract. Many types of contingencies also form essential elements of a property sale agreement. Let's check them out!

The Inspection Contingency

The contingency provision of inspection enables the buyer to have an expert home inspector inspect the property. If the inspector finds any maintenance or upgrade issues while inspecting, the buyer can make a request to the seller. This request can be about making the repairs and upgrades or settling at a lower price tag for the house.

The first step of adding this contingency in the contract agreement entails a home inspection by the property inspector. The inspecting authority ensures that all the utilities are in good working order. The inspector also checks other aspects of the house premises. Once this is done, the inspector prepares a report for the home buyer.

The report provides details of potential issues discovered during the home inspection. The buyer can then do one of the following:

• Give appraisal report approval, thereby proceeding with the deal
• Communicates disapproval of the appraisal report and retracts the contract
• Buy some time to have another look at the property by making a time extension request
• Request for house upgrades or repairs. The buyer proceeds with the contract if the seller makes repairs and home upgrades.

The Financing Contingency

A financing clause constitutes the financing contingency in which the buyer has the option to secure finances for the sale. The buyers can proceed with the deal if they can obtain reliable financing. However, the financing contingency enables them to retract the contract if they fail to get the finances to complete the purchase.

Appraisal Contingency

The incorporation of an appraisal clause in a real estate contract is beneficial to both, the buyer and the seller. The clause guarantees that the property's appraised value will not be lower than the sales price. This benefits the sellers, enabling them to sell their homes for at least their demand price.

However, if the appraised value is lower than the selling price, the buyer can use it as a bargaining tool. A buyer can terminate the offer or ask the seller to lower the price.

How To Negotiate Contingency Provisions With Sellers?

Understanding the contingency clauses is essential before negotiating the contract terms with the sellers. Each contingency serves a specific purpose and can impact the purchase price and terms.

For example, home sale contingencies may make the seller more willing to negotiate on the price. This is because they know the buyer depends on selling their current home. On the other hand, an inspection contingency may give the buyer more leverage in negotiating repairs or a lower price.

Parting Words!

Contingencies are essential to negotiating the purchase price and terms in a real estate contract. Home sale contingencies can be a crucial part of a real estate agreement. They provide protection to the buyers if they have to sell their existing homes to buy new ones. Checking out a home sale contingency example can help remove any confusion.

Moreover, appraisal, financing, and inspection contingency clauses can also be a part of property contracts. When negotiating contingencies, it's essential to carefully consider each one and its potential impact on the purchase price and terms.

Well-negotiated contracts with appropriate home sale contingencies can protect the buyer and the seller and result in a successful sale. Is a house sale contingency clause required in your contract? Select a suitable time frame in the clause and start marketing your home!