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What to Include in Your Contingency Contract

When navigating a real estate transaction, it's essential to protect yourself from potential risks and surprises. A contingency contract is a type of agreement between buyer and seller that outlines conditions under which the sale can proceed or be canceled. This type of contract provides a safety net for both parties by allowing them to back out if certain circumstances aren't met.

Essential Clauses in Your Contingency Contract​

Inspections Clause​

The inspections clause should include details on the types of inspections you plan to conduct, such as home inspections, termite inspections, and septic system checks. This provision can also specify who will pay for these services, ensuring that both parties are aware of their responsibilities.

Financing Clause​

This part of the contingency contract should outline any specific financial conditions or requirements. It might include contingencies related to loan approval, interest rates, or other financing terms.

Appraisal Contingency​

In this clause, specify whether an appraisal is required and what value you're expecting. This provision can help protect both parties from unexpected appraisals that don't meet expectations.

Due Diligence Clause​

This part of the contract should detail any additional research or investigations you want to conduct before finalizing the purchase. It might include reviewing tax records, public documents, or environmental data.

Inspection Contingency Timeline​

Establish a specific timeline for inspections and responses from your side. This ensures that both parties are aware of the timeframes within which these activities should be completed.

Additional Considerations​

Communication Plan​

Include a plan to communicate with each other regarding any issues or concerns that arise during the contingency period. Regular updates and open communication can help prevent misunderstandings.

Termination Conditions​

Clearly outline the conditions under which either party can terminate the contract. This might include specific dates, times, or circumstances where one or both parties have failed to meet their obligations.

Escalation Procedures​

Consider including procedures for escalating issues that cannot be resolved through regular communication channels. This ensures that both parties know how to proceed in case of disagreements.

Protect Your Interests​

By carefully crafting your contingency contract with these essential clauses, you'll be better prepared to protect yourself and ensure a smoother transaction process.