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Questions That Must Be Answered

Home buying contingencies are written clauses that are added to your contract to give you time to evaluate some aspect of the purchase before you proceed to closing. Think of them as questions that must be answered or events that must (or must not) take place. If the question is not answered to your satisfaction, or the desired event doesn't happen, you should be able to back out of the contract with no penalties.
Common Home Buying Contingencies

Financing

The contract should outline the type of financing you are willing to accept and include a clause that releases you from the obligation to purchase the home if those terms cannot be obtained.

Home Inspections


The contract should include wording about your rights to home inspections, such as the dates by which inspections must be completed. It should spell out your options if the home needs more repairs than you are willing to take on.

Additional Tests & Inspections

Contingencies that deal with the presence of radon, mold, and other toxic substances. A contingency that allows you to perform inspections for wood destroying insects, such as termites. A test to verify that private well water meets public health standards. Tests to verify that a septic system or well is functioning properly.

Other Common Contingencies

Surveys
Buyers sometimes make approval of a property dependent on the results of a boundary survey. You might expect it to show there are a minimum number of acres; that a specific lot line is where the seller says it is; or that neighbors have not encroached the property (built on it).

Sewer
Land that does not have public sewer service requires a septic system. The offer should be contingent on approval to install the type of waste system required to service the home you intend to build.

Water
In some areas you might need to verify that you own water rights to the property so that you're sure you can dig a well.

Appraisals
Use this when the appraisal must show that the home's value matches or exceeds its price. Pre-printed forms nearly always include an addendum that can be used to insert an appraisal contingency.

Deeds
The offer should state what type of deed the seller will give you at closing, along with a guarantee that it will be free of liens and other problems created by all past owners.

Easements
Do others have a right to use the property, such as a right of way to cross it to get to another? You definitely want to know if that type of easement exists before you decide to buy the home.

Don't Do This
What do these contingencies mean?

Contingent on a Radon Test
What about the test? What are the results you're looking for?
Contingent on a Septic Permit
What type of permit do you want? A conventional system? For how many bedrooms?

Contingent on a Water Test
What do you want the test to verify? That bacteria levels are below those accepted by public health standards? That the water has no heavy metals or pesticides in it?
You get the idea; explain the results you expect to see.

If You Must Sell Your Home First

You can make an offer that's contingent on the sale of your current home--meaning that you cannot act on the purchase until the current home is sold. Some sellers will accept such offers, some won't consider them. If they do accept your offer, the sellers will continue to aggressively market the property to buyers who can buy now.

That type of contract usually includes a "kick out clause," a statement that basically says: "if we get another acceptable offer, you have "X" number of hours to remove your sales contingency and move forward to buy the house, whether you've sold your current house or not." If you cannot move forward, the seller can back out of the contract.

For Sale By Owner Contracts
For your protection, always have a competent real estate attorney look over your offer before presenting it to a for sale by owner seller. Do not use the seller's attorney. If problems occur, you want to be sure you are dealing with someone who will look out for your interests

Bottom Line

Some contingencies are common in some areas of the US--but not others. If you're buying close to home, you may know which items should be included. If you aren't sure, use a qualified real estate attorney to help you with the transaction

Don't go overboard with unnecessary contingencies. That always makes sellers wonder if you are looking for an easy way out of the contract.

Every contract is unique, so there are an endless number of possible contingencies. Take some time to brainstorm before you make an offer to purchase. Outline your questions, turning them into contingencies that explain what you want to do and what results you expect to see. If you are unsure how contingencies should be worded, seek advice from a real estate attorney.