Contingency clauses are common in real estate transactions. For example, a buyer may use a loan contingency. This essentially means that the buyer is only obligated to move forward with the sale as long as they get the loan that they’re expecting.
After all, many people will contact a lender and get preapproval based on rough financial details. This allows them to make an offer. But they still have to go through a more rigorous process to get final approval for the loan. If they don’t get it, then they’re not obligated to purchase the property—even though they made the offer.
This increases the odds that the deal can fall through
Every contingency clause just creates a potential scenario where the deal could fall through. The seller may accept an offer, only to later find out that the buyer didn’t get the loan they needed. Another common example is a home inspection contingency. Even if the seller accepts the offer, if the home fails the inspection, then the potential buyer has the option to walk away without forfeiting any of their earnest money.
Because of this, some sellers prefer to accept offers that do not have contingency clauses. Even if the buyer doesn’t get their loan, they’re still obligated to purchase the property. Some buyers, looking to make their offer more attractive in a potentially competitive market, will remove these clauses. It’s a risk and a gamble, but it could mean that they get the property instead of someone else.
These types of issues can get complicated and may lead to disputes, so it’s important for those involved to understand exactly what legal options they have.