Byron Carlson Petri & Kalb, LLC | attorneys at law

3 reasons to use a contingency clause when closing on a home

On Behalf of | Jun 3, 2024 | Residential Real Estate

Finding the right home in an area you like that is within your budget can be challenging. Once you find one, you might want to rush ahead and secure the property before someone else takes it.

Take care not to get into a deal you cannot back out of if the property turns out to be worse than you think. This is where contingency clauses can help. Contingency clauses allow you to reserve the property but back out without penalty for certain reasons. Here are several key reasons you may need to back out

You cannot get the money to buy the property

A mortgage lender may retract or alter the offer they made or the buyer for your current house may drop out. Either could leave you unable to purchase the new place.

The property turns out to need a lot of work

Some properties are not as good as they look. You should always bring in an inspector. Depending on what they uncover, you might need to reconsider the purchase due to the amount you would have to spend or risks to your health, such as from toxins

There are undisclosed title issues

Just because someone is offering a house for sale, that does not mean they have the right to sell it. Maybe there is a lien on the property. Perhaps there is a boundary dispute, or maybe there is an ongoing battle over who inherited the house.

Whatever the problem, if you inserted a contingency clause to cover it, you have options. That may be to pull out of the purchase altogether, or it may be to renegotiate the price. Without that clause, you might have to go ahead with the purchase or face a penalty. Getting legal help to learn what clauses you need is wise.