When you sign a contract, you agree to abide by the terms of that contract. If you fail to do so, the other party may penalize you. It applies to buying a home, as it does to any agreement. Closing on real estate is not always straightforward. Things can crop up. That is why it is vital to put contingency clauses into your contract.
What is a contingency clause?
A contingency clause is an escape option. It says you agree to buy the property unless x happens. You can insert various clauses, permitting you to escape the contract without penalty if x, y or z occurs.
What contingency clauses do I need?
Here are some of the most common issues you need contingency clauses to cover:
- There is a problem with the property: Always get a survey carried out before agreeing to buy any piece of real estate.
- There is a problem with the title: Ensure the title is clean. That no one apart from the person selling it to you has any claim on the property. Problems can arise when family members dispute how the seller inherited the property. Or when someone owed money for work to the house places a lien.
- There is a problem with financing the purchase: If you need to sell your current home before purchasing your new one, make that a contingency. Otherwise, if your buyer drops out, it could leave you stranded. If the mortgage company retracts their offer or changes the terms, that could also mean you need to withdraw.
Discuss things with your attorney before signing any paperwork. They can help you draw up the contract you need.