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San Diego real estate library
Real Estate --- Contract Contingency Clauses
When signing your contract it’s important to check the
contingency clauses. Having the contract in your hands doesn’t
mean everything is perfect. Many contracts include weasel
clauses which enable a buyer or seller weasel out of the deal
easily.
There are many contingency clauses in place now to protect both
the buyer and the seller. Here are some of the more frequent
ones being used in the real estate market today.
1) Loan contingency. If the buyer can not get funding in a
certain amount of time he or she can pull out of the deal.
2) Sale of another home contingency. The buyer has made an offer
but it is reliant upon whether the home he now has will sell. If
it does not sell within a set time, the buyer is not held
accountable for the purchase offer.
3) Home inspection. The sale is contingent on whether the
property will pass the home inspection. The buyer has the right
to examine the home for any unforeseen damage which may not have
been made known.
4) Appraisal. If the property does not meet the appraisal
guidelines set forth by the lender, the buyer does not have to
uphold his end of the purchase agreement.
5) Lead based paint inspection. When a home has been built prior
to 1978, the buyer can have a lead base paint inspection. If
there is evidence of lead based paint, this lets the buyer out
of the contract. The house would be considered hazardous.
6) Water inspection. Many times the home is in a rural area
where there is no access to city water. The supply is by a well.
The well must be inspected. If it does not pass a health
inspection, the buyer does not have to buy the property.
7) Wood boring insects. A termite inspection is mandatory so
there is no chance of hidden damage. Although this is a problem
which can easily be repaired, many buyers will not buy a home
which has had evidence of termites.
8) Hazardous material contingency. This is similar to the lead
paint inspection. During the home inspection, the contractor may
come into contact with black mold or asbestos. Unless there is
an agreement between the buyer and seller to have this dealt
with the buyer can walk away from the deal.
9) Owners association acceptance. In some condos and town
houses, the buyer must qualify for the home owners association.
If they do not get accepted, they will be allowed to back out of
the deal.
10) Title report. The title report will let the parties know
about any liens, encumbrances, or easements on the property. If
these are not acceptable to the buyer, they can walk away and
not be held accountable. Something simple like the seller
failure to mention the oil company holds the mineral rights to
the property and can drill anywhere it wants, may make a buyer
think twice about purchasing the property.
These are just some of the many incidents which can be listed in
a purchase agreement. It is up to the buyer and seller to work
out as many of them as they can to seal the deal. Sometimes this
just does not happen. Here is where your real estate
professional can help to make sure things are worked out in a
timely manner. But, still things can and do go wrong, than each
party must move on to the next house or buyer.
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