Contingencies are conditions in the Residential Purchase Agreement that must be fulfilled for the sale to move forward. Each contingency typically includes a timeline for when it must be met and outlines the steps that both buyer and seller must take to satisfy the requirement.

Common Contingencies

Several types of contingencies might be included in a home sale contract:

1. Inspection Contingency: This allows the buyer to have the home professionally inspected to make sure there are no hidden issues. If significant problems are discovered, the buyer can request repairs, negotiate a lower price, or even back out of the deal without losing their deposit.
2. Appraisal Contingency: This contingency ensures that the home’s value is appraised at a minimum, specified amount. If the appraisal comes in lower than this value, the buyer may renegotiate the price or cancel the sale.
3. Loan Approval Contingency: This states that the sale is contingent upon the buyer securing an approved mortgage for the property. If they’re unable to secure financing, they can back out of the deal.
4. Title Contingency: This contingency ensures the seller has a clear title to the home and can legally sell it. If any liens, encumbrances, or claims are found on the title, these must be resolved before the sale can proceed.

Process for Fulfilling or Waiving Contingencies

To fulfill a contingency, the appropriate party (usually the buyer) must complete the required action within the specified timeline. For example, the buyer would schedule and complete a home inspection to satisfy the inspection contingency.

Once a contingency is fulfilled, the buyer will typically provide documentation to the seller, such as a clean inspection report or mortgage approval letter, as proof of completion.

If a contingency can’t be met, the buyer might ask the seller to waive it. For instance, if an inspection reveals major issues, but the buyer still wants to proceed with the sale, they might ask the seller to waive the inspection contingency.

However, waiving contingencies can involve some risk. For example, a buyer who waives the inspection contingency might end up responsible for previously unknown repair issues.

Every contingency is a potential negotiation point. Experienced real estate agents can provide advice based on market conditions and the specifics of the property and contract. It’s essential to understand each contingency, its implications, and how it affects your rights and obligations as a seller.