Real Es tate Weekly The Five Common Contingencies in Real Estate

As a Realtor, we deal with contingencies in contracts every day. As a consumer, you may or may not be aware of these contingencies. Contingencies are provisions that must be met for the property transaction to be completed or the buyer is entitled to terminate the contract and receive their earnest money back. They are critical in our contracts and in protecting our clients.

The most well-known contingency is the home inspection contingency. This gives the buyer the right to have the property that they are purchasing professionally inspected and request repairs and/or a credit from the seller by a certain date. The home inspection is typically completed during the due diligence period of a purchase and sale agreement.

Another popular contingency is the appraisal contingency. This allows the buyer time to have the property appraised by a neutral third party, typically the buyer’s mortgage lender’s appraiser. If the appraisal comes back lower than the sales price or with required repairs, the buyer may negotiate with the seller to handle such requests during the appraisal contingency.

The financial contingency protects the buyer should they not be approved to obtain a mortgage. An example of this would be the buyer losing their job during the financial contingency. The buyer would be protected and would receive their earnest money back in this situation.

Perhaps the most important but least talked about contingency is the title contingency. You cannot sell a property without clear or good title. There is a pre-written language in our Georgia Association of Realtors (GAR) forms that allows the buyer to examine title and terminate the contract, without penalty, should there be any issues. Most sellers will try to resolve any issues with title to push the transaction through. However, this is not always possible. An example of this would be a property owner, recently divorced, that has unpaid spouse support or alimony to their former spouse. I have seen this hold up contracts before when it cannot be resolved.

A home purchase is the largest financial investment most people make. When purchasing real estate, it is essential that you have a well thought out plan, with contingencies in a contract, to protect you. Many issues can be discovered throughout the course of a transaction, and you need to protect yourself. I highly recommend working with an experienced Realtor to do so.

Jess Barron is an Associate Broker with Lindseys, Inc. Realtors and former President of the Newnan-Coweta Board of Realtors. ■