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Contingency clauses: A must in any home purchase agreement

On Behalf of | Jan 22, 2025 | Real Estate Law

When buying a home, the excitement of closing the deal can be overwhelming, and it’s easy to make mistakes. One of the things you shouldn’t overlook in the home purchase agreement is contingency clauses.

Contingency clauses are conditions that allow you to back out of the deal without penalties if specific requirements aren’t met. This can act as a safety net if you encounter unexpected issues during the process.

Why are they so important?

A lot can go wrong when buying a home. For instance, the home’s appraised value may fall considerably short of the purchase price. This can lead to financing problems since buyers base the amount they are willing to loan on the appraisal value, not the agreed-upon price. You also risk overpaying and losing money in the process.

Similarly, a home inspection can reveal serious problems, yet you have already committed to buying the property. Your plans to finance the home might also fall through.

Having contingency clauses in the agreement covering such scenarios gives you the ability to walk out of the deal or renegotiate the purchase price without losing your down payment. The seller cannot sue you either for backing out of the purchase as it is contingent on conditions that were not fulfilled.

Protect your investment

Contingency clauses are not just legal formalities; they are essential to protecting your investment and peace of mind. As such, it’s worth taking the time to understand how they work and ensure they are part of the purchase agreement – you never know what could go wrong.

Getting a qualified review of your home purchase agreement before signing the dotted line can help you avoid costly mistakes, protect your financial interests and secure a smooth transaction.