When someone makes a real estate offer, they are offering a specific amount of money for the property. This could be more or less than the listing price, depending on the local real estate market at the time. If the offer is accepted, it is a binding agreement, and they often cannot walk away from the deal – at least not without losing their deposit.
Contingency clauses are an important component of real estate offers. The offer is only binding if those contingencies are met. This can sometimes give potential buyers a way to step away from a deal without losing any earnest money that they have already put down.
2 common contingency clauses
Perhaps the most common contingency clause is for a home inspection. Buyers may have examined the property themselves, but they are not professionals and may have overlooked key details that can affect the value of the property. They want to have a formal inspection carried out first, and they are only obligated to move forward with the purchase if the property passes that inspection. If it does not, updates or repairs may be needed.
It is also common for buyers to have a preapproval letter, but without final approval from a mortgage lender. As such, the offer may be contingent on them actually receiving that loan. If they are unexpectedly denied by the lender, they are not obligated to purchase a property that they now cannot afford.
It is important to understand how real estate contracts and purchase offers work and what legal options you have when addressing these issues.