Question 17 of 30 Questions over 30 Days answered in 30 Seconds - What is a contingency with an offer on my house?

Contingency means a provision for an unforeseen event or circumstance. Purchase Agreements can have several different continencies tied to them.. meaning, until the contingency is satisfied or released, the sale/closing is subject to them. Please keep in mind, all real estate is negotiable and the home seller and homebuyers often do negotiate through contingencies. Some examples of contingencies include:

Financing - It's subject to the buyer being able to obtain the financing they have written into the offer and how they plan to pay for the home. This also includes having the home appraise at or above the purchase price if a requirement of their financing. If their situation changes and they do not qualify for the mortgage prior to closing, the purchase agreement can be cancelled.

Inspection - To have a professional examine and inspect the home's condition for repairs needed, safety issues, hazardous items or potential issues with that home that could affect future re-sale value. If the buyer is not comfortable with or does not negotiate with the seller on these items, the purchase agreement can be cancelled.

Sale of Another Property - If the buyer has a home to sell to qualify for financing to purchase or to obtain the down payment money needed, they can place a contingency in the purchase agreement. If there home does not sell, the purchase agreement can be cancelled or in some circumstances, the contingency period may be extended.

10 Day Statutory Right of Rescission - Buyer in MN are given up to 10 days to review Homeowner's Association Documents - By-Laws, Rules, Covenants, Financial, etc. If there is something they do not feel they can accept, the purchase agreement can be cancelled. (examples - pet size/limits, inability to rent the unit, association not in a strong financial position, etc)

Subject to Third Party Approval - This is most commonly used in regards to short sales. If a home is selling for less than what is owed on it and the seller is negotiating with the bank to accept less and fulfill their mortgage obligation, accepted purchase agreements are contingent on the bank/lender approving the sale.

Other - This is a blanket contingency that can be used for many things depending on the homebuyer or home seller's situations and needs. Examples are - The home seller finding their home of choice to move to, a home buyer confirming with a city an alteration or use for the property will be approved, a 2nd home buyer viewing and accepting the purchase agreement (more common in relocations when only one home buyer has viewed the home), that an insurance claim has been completed, etc.

What would you like to know about? Ask anything you've been curious about dealing with selling your home, buying a home, the Minnesota real estate market, investing in real estate , etc. We want to provide you with the information most helpful to you!

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