Contingencies

D - Attorney Review: Necessary approval contingency?

Seriously consider including an addendum to the contract for an attorney review. 

An attorney review contingency:

This contingency is included on many Realtor purchase offers so that the attorney for either party can review the contract and make suggested revisions with the goal of mutual buyer/seller agreement. If agreement to the changes cannot be reached (within a few days), then the contract is voided and the earnest money is returned to the buyer. 

This allows the contract to be signed without fear by the buyers or sellers of having errors in the contract or having missed something.

The good, the bad and the ugly:

It gives you the peace of mind that you can negotiate and sign a contract and have the ability to get out of it (within the short time period specified). But then the buyers have the same option through their attorney–should they choose to do so.

To EASILY get out of a contract, either party can insist on modifying or adding contract stipulations that are outrageous. These include demanding such things as 50% of the purchase price as earnest money, putting the closing out several years, etc. Since the other party will not agree to these ridiculous demands, the contract is voided when the review period ends. 

The attorney review and ways to get out of a contract are covered in more detail in the CLOSE section > House selling concerns > How buyers can get out of the sales contract.  

Advantage it offers: 

This review promotes continuation to the selling process. It allows you and the buyer to sign in the heat of the moment without worrying about having missed legal counsel before signing the contract.

Common modifications include: changing the date for a closing that is inadvertently agreed to but turns out to be a holiday, clarifying contingencies, adding in an inspection, changing the earnest money amount, specifying a daily rental amount on a delayed possession, modifying the prorated items, having satisfactory review of local Homeowner Association rules, covenants, budgets etc.

Of course, you or the buyer can always negotiate a contract and request that your attorney review it before you sign it. However, this slows down the entire negotiation process, giving the buyer time to build on any fears of doing the right thing.

Some contracts to purchase contain an option period (like a week) that allows the buyers to terminate the contract for any reason, effectively negating the need for an Attorney Review clause since this option period can be used to have an attorney review the contract. 

Attorney review addendum:

The following clause is provided as an example to illustrate what a typical review could contain. Contact your local attorney for the wording he or she would prefer to use.

                     EXAMPLE

ATTORNEY REVIEW:
The terms of this contract (and all riders attached) except purchase price, are subject to modification by the parties’ attorneys within ___ business days following the date of acceptance. Notice of modification shall be in writing (fax acceptable) and shall state the specific terms being modified along with the suggested revisions and additions. If within ______ business days of the date of acceptance, agreement is not reached, this contract shall be null and void and all earnest money shall be refunded to the buyers.

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