Contingency Considerations
Selling a home can be a tricky process particularly during the negotiation phase. Added stresses can come up during this part of the home sale and issues such as fair asking prices, the state of the local real estate market, and property law come into the forefront during this period. One other worry that home sellers often face is the prospect of contingencies.
What Are Contingencies
Contingencies are essentially clauses that are written into the contract that states the terms of a home sale. They are only negotiable during the negotiation phase of a property transaction and if they are not executed, the contract can be legally cancelled. There are usually two standard contingencies that are written into every contract that are designed to ensure that the home sale is fair. The first of these contingencies is based around financing. Essentially, this financing contingency is designed to allow the prospective homebuyer from backing out of the property purchase in cases when they are unable to obtain a loan commitment from a lender and consequently is unable to honor their financial obligations. The second of these standard contingencies is an inspection contingency. This contingency is designed to allow the prospective homebuyer from backing out of the property purchase in instances where a neutral, outside professional inspector has found that the home has major problems that were hidden by the home seller.
A Seller's Worries
These two standard contingencies are designed to ensure that home selling negotiations are done in good faith. However, many home sellers often worry about other contingencies that prospective homebuyers may demand. For the most part, a home seller will not have to worry about an excessive number of contingencies when the local real estate marker is a seller's market. A seller's market is basically real estate conditions in which there are much more people looking to purchase a home than there are available homes for sale. However, in situations where the local real estate market is a buyer's market, or when there is much more homes for sale than there are prospective homebuyers, a home seller must be prepared to be flexible and accept contingencies.
Although the type of real estate market conditions are an important factor in determining whether a home seller will have to consider adding contingencies to the contract, the most important factors are: the price that the home seller wants for their home and also the condition of the property.
