Common Real Estate Contingencies
When you are buying or selling property, you may have heard your real estate attorney talk about contingencies. But what are contingencies, and how do they affect your real estate contract and real estate closing?
What is a Contingency?
There are a lot of moving parts to a real estate closing, and a lot of things that are unknown to the parties at the time the real estate contract is signed. That’s why the real estate contract has contingencies. Contingencies are things that the contract depends upon—that is, they need to happen a certain way, or a situation has to work out a given way, for the contract to have effect.
Usually, if the contingencies are not met, the parties can back out of the contract without penalty. Some contingencies have time frames within which a party must opt to exercise their right to back out of the agreement.
Funding or Mortgage Contingencies
One common contingency is that which requires that the buyer be able to obtain funding for the loan. In many cases, a buyer may not be approved for the loan at the time the property goes under contract.
So, the contract will say that if the buyer cannot get funding—for example, if the property doesn’t appraise at the proper amount, or if there is a problem with the buyer’s credit that prevents him or her from getting a loan—the contract is void.
Of course, to back out of the loan without penalty, the buyer must make a good faith effort to get financing. A buyer can’t purposely fail to apply for a loan just to get out of the contract under the mortgage contingency provision.
Title issues are another common contingency. A full and complete title search is not typically pulled at the time a real estate contract is set to be signed. The parties may not know if there is a title lien, code violation, or a tax lien at the time the contract is signed.
Title contingencies allow both the seller and buyer to back out of the contract without any penalties assessed if there are no liens on the property or other issues that may prevent the seller from being able to obtain ownership of the property.
In some cases, the seller might have the ability to clear any title issues that could prevent the buyer from backing out of the sale.
Inspections and Surveys
These are contingencies that give the buyer the chance to back out of the sale if there are problems with the property itself. Often, the seller will be given a reasonable opportunity to correct any problems found during a survey or inspection.
Problems come up during real estate closings. We can help you manage them, and give you advice to help you have a trouble-free closing. Contact the Tampa real estate lawyers at Gilbert Garcia Group, P.A. today.