Sale Contract Contingency Clause
A Sale Contract Contingency Clause is a provision included in a real estate purchase agreement that establishes specific conditions that must be met for the contract to be fully binding. This clause protects the interests of the buyer and, in some cases, the seller by allowing the transaction to proceed only if certain stipulations are satisfied.
Typically, a contingency clause can relate to various factors such as:
-
Financing Contingency: This stipulates that the buyer must secure a mortgage or financing by a certain date. If the buyer is unable to obtain the necessary funds, they can back out of the contract without penalty.
-
Inspection Contingency: This allows the buyer to have the property inspected within a specified timeframe. If significant issues arise from the inspection, the buyer can negotiate repairs, request credits, or withdraw from the sale.
-
Appraisal Contingency: This ensures that the property must appraise at or above the purchase price. If the appraisal comes in lower, the buyer can renegotiate the price or exit the contract.
-
Sale of Previous Home Contingency: This clause states that the buyer’s purchase is contingent upon the sale of their current home. This protects the buyer from being financially overextended.
If the specified contingencies are not met, the party benefiting from the clause has the right to terminate the contract without facing legal repercussions. This mechanism is crucial in real estate transactions as it provides a safeguard for parties against unforeseen circumstances that may affect the sale.
« Back to Glossary Index