What To Know Before Making a Real Estate Contingency Contract

Standardized Legal Documents What To Know Before Making a Real Estate Contingency Contract

Real Estate Contingency Contract From A to Z

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What You Should Know About a Real Estate Contingency Contract

A real estate contingency contract is a conditional purchase agreement that includes obligatory stipulations important for a successful sale. Contingencies in real estate are parts of the contract that make it legally binding and have the purpose of protecting the investors.

Contingency clauses are often included in real estate purchase agreements. Not handling the contingencies properly can negatively affect the negotiation process. This happens in cases when contingencies are extensively used, which can make the seller drop out of the deal.

Investors need to find a perfect combination of the number of contingencies, and this decision depends on the specific deal and property in question.

What Types of Contingency Clauses Should Be a Part of Real Estate Purchase Agreements?

If you want to create a rock-solid real estate purchase agreement, you need to know what contingency clauses to include. You can write these clauses for nearly any possible concern. Take a look at the table below to see some of the most used types:

Contingency Clause TypeIt Is Used When:
Appraisal contingencyThe buyer wants to ensure that the property is valued at the minimum specified amount
Financing contingencyThe buyer wishes to have more time and gather the funds to buy the property
Home insurance contingencyThe seller requires the buyer to buy a home insurance policy for the property
Home sale contingencyThe buyer needs more time to complete the sale of their current property
Inspection contingencyThe buyer wants to have the property inspected. This allows them to negotiate the purchase price or repairs based on the findings
Kick-out clauseThe seller needs protection in case the buyer uses a house sale contingency. This allows them to back out of the deal if a more qualified buyer shows up
Title contingencyThere are any issues with the title (an ownership dispute or lien). It gives the buyers a free pass to walk away in case the problem can’t be resolved before closing
Right-to-assign contingencyWholesale real estate investors want to ensure they have the option to back out if they can’t manage to assign the contract to another buyer in time

What Else Should a Real Estate Purchase Agreement Include?

In addition to the contingencies that make the document airtight, there are other elements a real estate purchase agreement must contain. Here is what this agreement normally includes:

  1. The exact sale price of the house
  2. The amount of deposit needed
  3. House address and description
  4. Terms of sale
  5. Duration of the agreement
  6. Signatures of the parties involved

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