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Sale Contract - Purchase Agreement Contingencies

Most real estate sale and purchase agreements contain contingencies. A contingency is a provision in a real estate contract that specifies the contract would cease to exist upon the occurrence of a certain event. An example of a real estate contract contingency would be the requirement that the buyer be able to secure a mortgage at a particular interest rate.

By far, contingencies are used by the buyer to anticipate potential problems. A contingency can allow the buyer to cancel the contract without penalty or amend the contract to adequately compensate the buyer for a problem with the property.

The possibilities of sale cntingencies in sale contracts can be endless but the most common include:

     1. Home Inspection Contingency

     2. Financing / Loan Contingency - the buyer specifies mortgage terms on which he/she will proceed with the sale.

     3. Appraisal Contingency - the property appraisal must be equal to or greater than the sale price. This contingency may allow the seller to reduce the sale price to meet the appraised value in order to satisfy this contingency.

     4. Sale of Other Real Estate Contingency - the buyer makes the contract contingent on selling their present real estate or the seller makes the contract contingent on purchasing a new home. This contingency is usually rejected or is restrained by a time limit.

    5. Kick Out Contingency - usually a contingency the seller puts in due to a buyer contingency. An example would be the rental or sale of the buyer's present residence. The kick out contingency allows the seller to "kick out" the contingency by providing the buyer a written notice, usually 72 hours in advance, afterwhich the buyer can remove the contingency and proceed with the purchase or release the seller from the contract.

     6. Insurance Contingency - due to toxic mold, earthquakes, hurricanes and flooding, buyers in some states find it difficult to get insurance. This makes the contract contingent on the buyer applying for and receiving an insurance commitment in writing.


Commercial real estate contracts present somewhat different concerns for buyers. In the present market it is not uncommon for a commercial sales contract to include:

     1. Attorney Approval Contingency - the buyer may require an approval by his/her attorney due to the potential complexity of the sale contract.

    2. Environmental Cleanup Contingency - this is usually verbiage in the contract regarding no environmental cleanup issues.

     3. Loan Contingency - the buyer may require a loan of at least 75-80%. This loan to value ratio is much harder to get on commercial property.