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What are contingency clauses in real estate closing?

On Behalf of | Nov 1, 2022 | Real Estate Law |

If you are looking to seal the deal on buying a property, you should always insert contingency clauses. These are crucial to allow you to withdraw from the transaction if you encounter last-minute problems.

A contingency clause effectively says, “If this happens, then the deal is off, or there is a need to renegotiate.” If you don’t put them in, you may end up tied to a contract for a property you no longer want to buy. The only way to get out without contingency clauses may be to pay a hefty financial penalty.

Here are two clauses to consider inserting:

A financing clause 

You may have a buyer lined up for your house. What would happen if they dropped out? Could you still afford to buy this new property without the income from the sale of your current one?

What about your mortgage offer? If the lender discovers something they don’t like about your financial situation in their final checks, they may withdraw their offer. Or they might make borrowing more expensive than you can afford.

A survey clause

It would be foolish to buy a property and then discover serious problems with it. Getting a survey should catch those faults first and allow you to negotiate the price down or walk away.

A title clause

The last thing you need is to buy a property with problems over who owns it. If there are issues with the title, you can ask the owner to sort them, or if you prefer, back out.

These are just some of the contingency clauses you can insert to protect you when closing on a property. With so much money on the line, getting legal help will be crucial to help you navigate this tricky process.