Contingencies

C - Home Sale Contingencies: What are the key ones?

Below are examples of other common home sale contingencies. The ramifications of the inspection issues below are covered in detail in the CLOSE section. 

Home inspection:                    

Some contracts allow the buyers to back out of a purchase agreement if they are unhappy with the inspection. Others call for a repair/remediation period so that agreement can be reached between the two sides when problems are found.

How much each party agrees to repair or accept depends on the seriousness and cost of the repair, balanced against the fairness and the motivation of both parties. 

Termite/pest inspection:   

Some lenders require termite inspections. The farther north one goes, the less the creatures are a problem. If they exist in your area, this is an inexpensive test that is commonly done.

Radon test:   

Radon has become a fairly prominent health concern since the 90’s. A large percentage of buyers want a radon test performed.

Lead paint test:

Homes built before 1978 in the US most likely had lead paint. Most people grew up in houses that used lead paint. A comprehensive test can be expensive, such that most buyers forgo it, although inexpensive tests from local hardware centers are now available. The serious health danger usually comes from houses with old painted window trim that a baby could teethe on or other areas where the old lead based paint could rub or peel off and be ingested.

Lead intake at an early age is a serious and legitimate concern. Witness the attention it has received in the news concerning the staggering amount of toys imported from China that contain lead based paint. It can cause death in children and family pets. As such, it has become a concern for many homebuyers.

Test for mold:

As allergies have become a bigger issue, mold has become the latest evil. If water has been able to enter the property without the ability to evaporate, mold can become a problem.

Contingency upon you finding your next home

You (the seller) can make the sale contingent upon finding your next home. You can even specify a search period for say, 90 days–but of course you'll need to find buyers who will go along with this request.

What buyers would you want to buy a house that is contingent upon the seller having 90 days (or even 30 days) to find a house that suits them? If the sellers can't, the buyers are left high and dry, having paid for a mortgage application, attorney fees and any inspections, let alone being without the home they planned on moving into.

Never market your home with this stipulation, as this will eliminate most potential buyers. Even bringing up this contingency after they make an offer will most likely merit a rejection. 

Options, like renting back from the buyers, a delayed closing or delayed possession can be negotiated. It’s also advisable to have attorney help with such a contractual condition. 

General contingency considerations:

When agreeing upon a closing date, always allow enough time for contingencies to be satisfied, although deadlines for these events should occur as soon as reasonably possible.

If there's a problem in meeting a deadline, both parties can agree to an extension.

If the contract allows the buyers to use contingencies to easily get out of the agreement, then the amount of earnest money the buyers put down tends to become meaningless. The exception is when the buyers don't have any contingencies and decide not to buy and the contract specifies that they forfeit their earnest money.

If you add a contingency addendum, be sure that all parties sign this separate page to acknowledge agreement. If you change anything on the original contract document, be sure all buyers and sellers sign or initial next to the modification. 

Both buyers and sellers can have a contingency for just about anything. However, getting the other party to always agree to it is another thing. 

When a contingency is removed during the contract period, it's often through a phone call from one agent notifying the other, advising that a contingency has been met (dropped) such as the inspection contingency or subsequent inspection repairs or that the buyers sold their house, etc. In many areas, the other party wants this release info in writing, with signatures. Some locales even have a contingency release paper form. Thats because we need to cut down more trees.