Interested in an extra layer of protection when buying or selling property? Make sure you know about contingencies. Writing certain clauses into your real estate contract may give you some much-needed flexibility, including the right to back out of the contract under certain circumstances. Here are three common types of contingencies you may want to consider:
A third-party financing contingency can benefit buyers. If buyers can’t obtain financing and properly notify the seller within the time frame outlined in the agreement, they will be relinquished from penalties, including forfeiture of earnest money and the obligation to purchase the property.
Selling one home before buying another
If you need to sell your property before buying another, the Texas Real Estate Commission (TREC) has a contract addendum that permits buyers to terminate a contract if they can’t sell their present property before closing on a new home. The time frame is negotiable. If the buyer can’t meet the terms of the contingency, the contract will terminate, and the earnest money is refunded to the buyer.
TREC’s addendum also protects sellers who agree to this contingency. If a seller receives a second offer and accepts it as a back-up contract, the seller may notify the first buyer of this second contract. At that point, the initial buyer can either terminate the first contract or waive the contingency.
Sometimes a buyer is interested in a property, but finds out the seller has a contract with another buyer. Since there’s a chance that deal could fall through, the second buyer can make an offer contingent on the first contract failing to close. TREC also has a contract addendum for this type of contingency.
Sellers usually like these contingencies because it makes it easy to pursue another buyer if the first one doesn’t work out. If the first deal does not terminate by the date specified or closes, the second buyer can move on without having invested extra time or money because the back-up contract terminates, and the earnest money is refunded to the second buyer.
Contingencies can be quite helpful. If you have questions, please don’t hesitate to contact me. I’d be delighted to be of assistance!
Pictured above: This cute Mediterranean bungalow at 228 E Lullwood in San Antonio’s Monte Vista neighborhood is a two bedroom, two bath home with a fireplace. Fresh paint indoor and out. Cove ceiling in living room. Plaster walls and wood flooring. New roof on house 2017. New gutters 2019. Garage roof not replaced. Needs some updates but very charming! Listed by my Nix Realty Company colleague Marnie Simpson. Let’s go see it!
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