Which of the following Is an Example of a Common Contingency Clause in a Purchase Agreement

When it comes to purchase agreements, one common clause that is included is the contingency clause. This clause is designed to protect both the buyer and the seller in the event that certain conditions are not met before the sale is finalized. In fact, it is rare to find a purchase agreement without some form of contingency clause.

So, what are some examples of common contingency clauses found in purchase agreements? Let`s take a closer look.

1. Financing contingency clause: This clause is often included if the buyer is relying on a loan or mortgage to finance the purchase. It states that if the buyer is unable to secure financing within a certain timeframe, the contract will be terminated. This protects the buyer from being forced to purchase the property without the necessary funds and protects the seller from having to wait indefinitely for the buyer to secure financing.

2. Inspection contingency clause: This clause allows the buyer to have the property inspected by a professional inspector before finalizing the purchase. If the inspections uncover any major issues or defects, the buyer can either negotiate repairs or walk away from the deal altogether. This protects the buyer from unknowingly purchasing a property with serious problems and protects the seller from any surprises that may arise after the sale.

3. Appraisal contingency clause: This clause is often used if the buyer is obtaining a mortgage to finance the purchase. It states that if the property appraises for less than the purchase price, the buyer has the right to terminate the contract or negotiate a lower price. This protects the buyer from overpaying for a property and protects the seller from being locked into a sale that is not financially feasible.

4. Title contingency clause: This clause ensures that the seller has clear and marketable title to the property being sold. If any issues arise with the title, such as liens or judgments against the property, the buyer has the right to terminate the contract or negotiate a resolution. This protects the buyer from purchasing a property with legal issues and protects the seller from any unforeseen title problems.

In summary, contingency clauses are important components of any purchase agreement. They protect both the buyer and the seller from potential issues and misunderstandings during the sale process. The four examples discussed here are just a few of the many contingency clauses that can be included in a purchase agreement. It is always best to consult with a qualified real estate attorney or agent to ensure that all necessary clauses are included in the contract.