Other key contingencies
Ramifications and dealing with the inspection issues below are detailed in the CLOSE section. Most visual inspections are paid for by the buyer, per the contract.
Some contracts allow the buyers to back out of a sale if they are unhappy with the inspection. Most call for repair or remediation to see if agreement can be reached between the two sides.
Some lenders require termite and pest inspections and could include structures besides the house (garage). The farther north one goes, the less the creatures are a problem. Otherwise, this inspection is commonly done. Some lenders demand treatment, before closing, if any sign of past or present infestation is discovered.
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. A comprehensive test can be expensive, such that most buyers forgo it, although inexpensive tests from inspectors and local hardware centers are available. Health danger comes from old painted window trim that a baby could teethe on or areas where old lead based paint could rub or peel off and be ingested.
Lead intake at an early age is a legitimate concern. Witness the attention it has received in the news concerning toys imported from China that contain lead based paint. It can cause death in children and pets.
Test for mold:
Allergies have become a bigger issue with mold the latest evil. If water enters the property without the ability to evaporate, mold becomes a problem.
Contingency upon YOU finding your next home
As a seller you can make the sale contingent upon finding your next home. But of course you'll need to find buyers who will go along with this request.
What buyers would want to buy a house that is contingent upon the seller having 60 or 90 days to find a house that suits them? If the sellers can't, the buyers will have paid for a mortgage application, inspections, possible attorney fees and no home to move into.
Don't market your home with this stipulation. It will eliminate most potential buyers.
Options, like renting back from the buyers, a delayed closing or delayed possession can be negotiated. It’s also advisable to have attorney help in these situations.
An attorney review contingency:
This contingency is included on many Realtor purchase offers/contracts so that the attorney for either party can review the contract and make suggested revisions (within a few days) with the goal of mutual buyer/seller agreement. If agreement to the changes cannot be reached, the contract is voided and the earnest money is returned to the buyer.
This allows the contract to be signed - before attorneys review it before it is signed - without fear by the buyers or sellers of having errors in the contract or having missed something.
This review 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 during the "review period", 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.
Advantage it offers:
It allows the seller 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 gives the buyer time to build on any fears of doing the right thing.
Some contracts 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 is an example of a typical review clause. Contact your local attorney for the wording he or she would prefer to use.
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 and shall state the specific terms being modified along with the desired 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.
Both buyers and sellers can have a contingency for just about anything that they agree on.
If a contingency addendum is added, be sure that all parties sign any additional pages to acknowledge agreement. If anything is changed on the original contract document, be sure all parties initial next to the modification.
Allow enough time for contingencies to be satisfied, although deadlines for these events should occur as soon as reasonably possible, although both parties can agree to an extension.
If buyers can use contingencies to easily get out of the contract, then the earnest money tends to become meaningless. An 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.
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 have a contingency release form.
Other contingencies include (but are not limited to) inspections by specialists of furnaces, wells, asbestos, roof and plumbing.
More on CONTINGENCIES