16 May What Are Contingencies? Things to Know When Selling Your Home
We’ve been working in St. Louis real estate for more than a decade, and home sellers often ask us: “What exactly is a contingency?” Apart from being a fancy word, contingencies are very important in the home sale process. Here’s what you need to know about contingencies when selling your home:
What Is a Contingency?
A contingency is a provision in a home sale contract that requires certain things be done before the agreement is considered binding. There are many kinds of contingencies. Here are two of the most popular types:
- Financing Contingency: Conditions the sale on the buyer successfully obtaining the financing needed to purchase the house. With this contingency in place, if a buyer is unable to obtain a mortgage, they can walk away from the deal.
- Inspection Contingency: Conditions the sale on the completion of a satisfactory home inspection. If a buyer has included this contingency in the offer and they aren’t satisfied with the home inspection report, they can walk away.
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Other contingencies condition the home sale on things like:
- Sale of the buyer’s current home
- The seller finding a replacement home
- Contract review by an attorney
- Appraisal value
- Testing for hazardous substances, chemicals or radon
Not all of these are super common, and buyers and sellers sometimes get pretty creative. Some contingencies are seen as unfavorable to either a buyer or seller, and can hold up the sale of your home. Before deciding on which contingencies to include in your contract, talk with your real estate agent.
Why Do Contingencies Matter?
It is said that contingencies are “a buyer’s best friend,” but both the buyer and seller can benefit from contingencies. Contingencies are important because they can protect you against risk.
A home sale is a big deal for both parties involved. You don’t want to expose you and your family to unnecessary financial, legal, or health risks. If you’re selling your home, talk with your real estate agent about what contingencies make the most sense for you.