Common Contingencies in Real Estate Contracts
Chances are that you came across this article because you are looking to buy a home and/or potentially sell your home. In this article, we will provide an overview of what contingency clauses are in real estate contracts, what common contingencies are and what they mean for you. We will also explore some things that you should be keeping in mind when asking for contingencies and negotiating over contingencies in real estate contracts.
If you are signing a real estate contract if you are selling or buying property, you must understand what contingency clauses are, why contingency clauses are important, and how contingency clauses could affect you.
Related article: Negotiation Tips for Buying a Home After a Home Inspection
How do real estate transactions work?
Real estate transactions usually begin with an offer. A buyer usually presents documents, an Agreement of Purchase and Sale (APS) that is intended to demonstrate to the seller their intent to buy the seller’s property.
The Agreement of Purchase and Sale (APS) documents are commonly referred to as an offer. An offer allows the Buyer the opportunity to detail the conditions they want to place in their offer to buy the seller’s property.
When a seller receives an offer, they have three potential choices. The seller can accept the offer without making any changes and the transaction will move forward accordingly.
The seller can reject the offer and present the buyer with a counteroffer and the buyer and the seller would be negotiating until both parties come to an agreement. Or they can reject the offer altogether. If neither party agrees to an offer, the offer will become void and the transaction is over.
Once both parties (the buyer and the seller) agree to the terms specified in the offer, the buyer usually will make an earnest money deposit. The earnest money deposit is meant to serve as a gesture of good faith.
An earnest money deposit will usually be 1% to 3% of the home’s total sale price. The funds from an earnest deposit would be held in escrow when the closing process begins.
An escrow is a financial and contractual arrangement where a third party will receive and regulate the payment of funds that are required by two parties in a given transaction. Escrow helps ensure that transactions where large amounts of money are involved because the payment (in this case the earnest money deposit) will be kept in a secure escrow account. The payment of escrow ideally would only be released to the seller once all of the terms of the agreement are met.
Key Components to a Real Estate Contract to Purchase Property
A standard Agreement of Purchase and Sale document will usually include at a minimum, the following items:
- The mutually agreed upon sale price for the home
- Specific information related to the earnest money deposit and the amount for the earnest money deposit
- The address of the property and a description of the property
- The terms of the sale
- The timeline for the closing
- The date of the closing
- The homebuyer’s contingencies (if the buyer has any contingencies)
In this article, we will focus on the home buyer’s contingencies that can be added to a real estate contract and how they might affect you.
What are contingency clauses in real estate contracts?
For this article, a contingency will be defined as “a future event or circumstance that is possible but cannot be predicted with certainty.” Therefore, a contingency clause in a real estate contract is meant to specify a condition or conditions that need to be met or specific actions that need to happen in order for a real estate contract to become legally binding.
A contingency clause becomes part of a legally binding contract for a real estate transaction, when both the buyer and the seller, agreeing to the terms of the contract, sign the contract.
A contingency clause in a real estate contract provides all of the parties involved with the right to back out of this transaction under a specific set of circumstances that are negotiated between the buyer and the seller.
The circumstances that you will allow you to back out of the transaction will be outlined in the contract. This contract for this real estate transaction will become legally binding and enforceable once both the seller(s) and the buyer(s) sign the contract.
A contingency clause in a real estate contract is a condition that has to be met in order for the transaction to move forward. Fulfilling the condition set out a contingency clause then becomes a requirement for completing the sale and closing the deal.
Contingency clauses or contingencies might include details of the terms of the contingency and a timeframe for the contingency to be removed. One contingency might provide a buyer with a timeframe, such as a buyer has 15 days to have the property inspected.
Another contingency might specify certain terms, such as the buyer has 21 days to secure a 30-year fixed-rate conventional mortgage for 80% of the purchase price with an interest rate that is no higher than 5%. Each and every contingency clause should be clearly articulated in writing in the contract to ensure that all involved parties understand the terms of the contingency.
It is important to note that if the conditions of a contingency clause are not met, the contract will become null and void. Once a real estate contract is considered to be null and void if a contingency clause is not met, usually, one party (usually the buyer) will be able to back out of the contract without facing any legal repercussions.
However, if the conditions for a contingency clause are met, the contract will be legally binding and legally enforceable. This means that if one party decides to back out of the deal where all of the conditions for contingencies are met, this party would be in breach of contract.
The consequences you could face for being in breach of contract for real estate contracts vary. If you are the buyer, you might forfeit your earnest money deposit to facing lawsuits. For instance, if a buyer backs out of a contract and the seller is unable to find another for their home, the seller could sue the buyer for specific performance and force the buyer to purchase their home.
Your ability to anticipate any potential problems and include contingency clauses in real estate transactions is about having the insight to include contingencies from the beginning. Some might argue that eliminating contingency clauses will allow you to close deals more easily.
However, not including contingency clauses can you leave you high and dry personally and financially, if and when anything goes awry. Having a clear understanding of contingencies in real estate contracts can help you protect yourself and ensure that you are getting the best deal possible.
Rules to Follow in Including Contingency Clauses in Real Estate Contracts
If you have a clear understanding of what common contingency clauses are you will be better prepared when it comes to negotiating with the (buyer or seller) about the specifics of the real estate transaction at hand. Knowing and following these rules for contingency clauses will help you to be better prepared for when you arrive at the negotiating table.
Real Estate Contracts with Contingency Clauses are Conditional
As mentioned earlier, a real estate contract will only be valid if certain tasks are taken or certain outcomes are avoided. The type of contingency might differ, but these contingency clauses determine whether or not a contract will be binding.
Base Contingency Clauses You Add to a Contract on Specific Events
In order for a contingency clause to be successful, each contingency must be specific and measurable. Consider this, a contingency cannot state that the property needs to be improved because in the eyes of the law there is nothing you can measure which proves that this condition has or has not been met.
However, a specific and measurable contingency could occur if a property has a leaky roof. The contingency could be that the sale will not go through unless the seller fixes the leak in the roof before closing. This contingency is successful because it is specific and does leave any room for interpretation.
Contingencies Need to Have Deadlines
A real estate transaction is time-sensitive, and chances are that most people do not want to spend months trying to close a deal. Therefore, it is important that you set a reasonable timeline for dealing with contingencies. Setting a timeline for dealing with contingencies can help ensure that the closing stays on schedule and will hold all parties involved accountable for removing the agreed-upon contingencies.
This Real Estate Contract Should be Legally Binding
Whether you are buying or selling you should take steps to ensure that your contract and contingencies will be legally binding. Ensuring that your contingencies are binding will help protect all involved parties and ensure that every contingency is met or removed accordingly.
You need to make sure that each contingency is clearly stated in writing in the contract to ensure that all involved parties will be aware of what they need to do. Doing this will help to ensure that all of the conditions will be met for contingencies and provides everyone with a framework for what happens if the condition for a contingency is not met.
Common Contingency Clauses in Real Estate Contracts and What they Mean For You
The following contingency clauses are some of the most common contingency clauses in real estate contracts. However, it is important to remember that these are not the only contingency clauses you might find in a real estate contract. If you have questions about real estate contracts or contingency clauses you should speak with a real estate attorney or a real estate agent or broker.
Home inspection/due diligence contingency clause
One of the most common contingency clauses in real estate contracts is the home inspection or due diligence contingency clause. This contingency clause allows for the buyer to have a professional home inspector come and inspect the home within a certain time period that is specified within the contract. This time period to remove this contingency could be five to seven days or longer.
The home inspection or due diligence contingency clause is designed to allow the buyer to back out of the transaction based on the home inspector’s report. This clause might allow for the buyer to negotiate with the seller about performing repairs for deficiencies outlined in the home inspector’s report.
Depending on what a home inspector discovers, a buyer might work with the seller to see if the seller is willing to lower the previously agreed-upon sale price to compensate for the cost of repairing major defects in the home.
When a general home inspector is conducting a general home inspection, they will be looking at the following areas:
Exterior inspection (an inspector will be looking at these areas)
- Exterior Walls
- Garage or carport (if applicable)
- Roof, attic, and chimney(s) (if applicable)
- Exterior water drainage and water disbursement
- Waste systems as applicable (an inspector will be looking at septic systems if your home is located in a rural area or if you have an older home)
- Porches, decks, and patios
- Yard/Garden (as applicable)
- Wall Coverings
Interior inspection (an inspector will be looking at these areas)
- Electrical system
- Heating, Ventilation, and Air Conditioning systems (HVAC)
- Kitchen appliances
- Fire safety
- Lead paint
- Interior water drainage and water disbursement
- Flooring quality
- Noxious gases
- Windows and doors
- Basements and crawl spaces
As the buyer, depending on how the terms of your home inspection contingency clause are written, you will have four options as to how you can proceed when you receive the home inspector’s report:
- You can acknowledge your approval of the home inspector’s report and what the home inspector found. If you acknowledge your approval of the home’s inspector, this real estate transaction should move forward normally.
- You can acknowledge your disapproval of the home inspector’s report and whatever the home inspector uncovered. In this instance, the earnest money you put for a deposit will be returned to you and can back out of this transaction without facing any legal consequences.
- You can request the seller to provide you with additional time to have different professionals come and perform additional inspections as needed. You would do this in the event that the first home inspection uncovered something that you need to have further investigated.
- You can submit a request asking them to perform repairs or provide you with a concession. A concession is a discount or a benefit a seller might offer a buyer to help cover their closing costs, the cost of new appliances, and/or the cost of making repairs for defects uncovered by a home inspector. If the seller receives the buyer’s repair requests and refuses to honour a buyer’s repair request(s), the buyer would be able to back out of the transaction and have their earnest deposit money returned to them.
In other words, if you have a home inspection done and learn that the home requires more work then you are looking to do, depending on how your offer is written, you might be able to back out of the transaction and have the earnest money returned to you.
To learn more about what home inspectors are looking for you can check out our home inspection checklist [Inspection Checklist when buying a home in Toronto]. To get an idea about how much home inspections might cost in Ontario you can check out our guide which details how much home inspections cost in Ontario [How Much Do Home Inspections Cost in Ontario?].
If you are looking to learn more about the different types of home inspections and when you might have them done you can check out our guide which outlines the different types of home inspections and when you might have them done [Different Types of Home Inspections].
To learn more about the importance of home inspections you can read our guide which explains why home inspections are important [The Importance of Doing a Home Inspection]. If you want to learn more about home inspections and how they are different from appraisals, you can read our guide to the difference between home inspections and appraisals [Home Inspection vs. Home Appraisal: What are the Differences].
Cost-of-repair contingency clause
The cost-of-repair contingency clause is a contingency clause that specifies the amount of money required to perform necessary repairs. For instance, if a home inspector notes in their report that repairs for the home will cost more than a certain dollar amount, the buyer would be allowed to back out of their contract to buy this home.
Ideally, the buyer’s earnest money deposit in this scenario would be returned to them. Frequently, the cost-of-repair contingency is based on a certain percentage of a home’s sale price, such as 1% to 2% of the home’s sale price.
Appraisal contingency clause
The appraisal contingency clause is meant to protect the buyer because it helps to ensure that the property’s fair market value corresponds to a minimum specified amount of money. This helps ensure that a buyer is not overpaying when they are buying a home.
If a professional real estate appraiser performs an appraisal and the property’s appraised fair market value is lower than the minimum specified amount of money for this contingency, the buyer will be able to back out of the transaction.
Ideally, your appraisal contingency clause will be written in such a way that it will force the seller to refund your earnest deposit money. Or the seller can opt to choose to lower the previously agreed-upon sale price for the home to match the amount of money that represents the home’s appraised fair market value.
However, an appraisal contingency might contain language that permits the buyer to proceed with the transaction even if the property’s appraised value is below the specified amount. This generally happens within a certain amount of days after a buyer has received and reviewed the appraiser’s report with their appraised value for the home. If the buyer wishes to back out of the contract, they will have to back out of the deal within a certain amount of time specified in the appraisal contingency clause.
An appraisal contingency clause will usually include a certain release date, a date on or before which the buyer will need to notify the seller if there are any issues with the appraisal. If the appraisal comes back and the appraised value of the home corresponds with the sale price, the transaction will proceed.
If there are no issues with the appraisal contingency, then the buyer will have been deemed satisfied with this contingency. Once a buyer has been deemed satisfied with this contingency, the buyer will not be able to back out of this transaction.
To learn about the difference between appraisals and current market assessments you can check out our guide which details the difference between appraisals and current market assessments [Differences Between a Home Appraisal and a Current Market Assessment in Ontario].
To learn more about the difference between home inspections and home appraisals you can check out our guide which outlines the differences between home inspections and home appraisals [Home Inspection vs. Home Appraisal: What are the Differences].
Financing or mortgage contingency clause
The financing or mortgage contingency clause is another extremely common clause in real estate contracts. This clause states that your offer will be contingent on your ability to obtain financing. The financing clause will specify the type of financing you wish to obtain, the terms of the financing, and the amount of time you will have to apply for and be approved for a loan.
The financing contingency can be helpful for buyers because it protects you if your loan or financing falls through at the last minute and you are unable to secure financing at the last minute. This contingency will allow you to back out of the transaction without facing any legal consequences or losing the money you put up as part of your earned deposit. The financing contingency is one reason why sellers prefer working with all-cash buyers who will not need financing in order to buy their home.
The financing contingency protects the buyer because the buyer will only be obligated to complete the transaction if they are to secure financing or a loan from a bank or other financial institution.
Usually, the financing contingency will include an appraisal contingency to ensure that the lender is satisfied with a property’s appraised value. If a lender is not satisfied with a home’s appraised value, they will not issue borrowers a mortgage commitment letter. The financing and appraisal contingency will protect buyers because they ensure that the home is being appraised for the amount of money that it is being sold for.
House sale contingency clause
The house sale contingency clause makes a buyer’s offer to purchase the seller’s home contingent upon a buyer receiving and accepting an offer to purchase their current home. This clause is meant to protect buyers in the event that they are unable to close on the sale of their current home before they close on the sale of their new home.
This means that if buyers are unable to sell their current home for their asking price within an amount of time specified in the contingency clause, they will be able to back out of the transaction without facing any legal or financial consequences.
Sellers with good reason might be reluctant to accept an offer contingent upon the buyer selling their existing home and they might only accept such an offer as a last resort. If you are buying in a competitive market where buyers are competing over limited inventory, presenting a seller with an offer to buy their home that is contingent upon selling your current home might work against you. However, if you are looking to buy in a slower market, a seller might be more likely to accept this type of offer.
Offers that are contingent upon the buyer being able to sell their existing home before buying a new home are meant to protect buyers who are looking to sell their home before buying another home. The specific details of any contingency, especially a house sale contingency need to be specified in the Agreement of Purchase and Sale documents. Since real estate contracts are legally binding it is important that buyers and sellers review and completely understand the terms of a house sale contingency.
There are two types of house sale contingencies, the sale, and settlement contingency and the settlement contingency.
The sale and settlement house sale contingency clause
The sale and settlement contingency means that a buyer’s offer to purchase a seller’s home will be dependent upon the buyer selling and closing on the sale of their existing home. This type of contingency is used when a buyer has not received and accepted an offer to sell their current home.
Usually, this type of contingency will allow the seller to continue to market their home to other potential buyers, with the stipulation that the buyer will be provided with the opportunity to remove the settlement and sale contingency within a certain period of time (usually 24-48 hours) if the seller receives another offer. If the buyer cannot remove this contingency, their contract to buy the seller’s home will be terminated so the seller can accept another buyer’s offer. In this scenario, the buyer’s earnest money deposit will be returned to them.
The settlement contingency clause with the house sale contingency clause
A settlement contingency is used when the buyer has marketed their property, has an offer to buy their home and has set a closing date. It is important to note that a property will not be truly sold until the closing or settlement officially happens. This contingency clause protects the buyer if the sale of their current home falls through for any reason.
Usually, the settlement contingency clause will prohibit the seller from accepting any other offers on their home during a specified period. This means if the sale of the buyer’s home closes by the specified date, the buyer’s contract with the seller will remain valid and the transaction will proceed normally. If the sale of the buyer’s existing home, they should be able to back out of their contract to buy the seller’s home without facing legal or financial consequences.
The house sale contingency clause: what does it mean for you as the seller?
Accepting an offer that is contingent upon the buyer selling their existing home can be risky because there is no guarantee that the buyer’s existing home will sell. Even if your contract allows to continue to market your home and accept other offers, your home might be as listed as “under contract”. Buyers tend to steer clear of a property that is under contract so they are not wasting their time and falling in love with a home they may never be able to buy.
Before you agree to accept an offer that is contingent upon the buyer selling their current home, the seller or the real estate agent or broker representing the seller should investigate the potential buyer’s current home so they can determine:
- If the home is already on the market. If the home is not on the market, this probably is a red flag because this might indicate that the potential buyer is only thinking about selling their current home so they can buy a new home.
- If the home is priced appropriately for the market. A real estate agent or broker can put together a list of comparables, based on recent sales of similar homes in the area to ensure that the home has been priced to sell.
- How long the home has been on the market. If the home has been on the market for a long time, it is possible that the seller’s asking price may be too high, the procedure to show the home is difficult, and/or the market is slow.
- The average time that homes in the buyer’s neighbourhood are on the market for. If the average time for homes in the buyer’s neighbourhood is around 30 days, one might expect the potential buyer’s home to sell. If the average number of days that homes are on the market in the potential buyer’s neighbourhood is 90 days or more, the seller could be waiting for the potential buyer to sell their home with a small chance that the potential buyer’s home will sell.
- A home sale contingency might be good if the seller’s property has been on the market for a while. If the seller has had a time finding a buyer an offer to buy their home with a house sale contingency is still a contract and there is always the potential that the potential buyer’s home will sell in time.
If you are considering accepting an offer with a house sale contingency clause, it is recommended that you limit the amount of time that a potential buyer has to sell their existing home to one to four weeks. This time limit will put pressure on the buyer to lower their asking price and make a sale.
This time limit for offers with house sale contingencies will prevent the seller from losing too much time if their transaction with the potential buyer does not close. Additionally, sellers can include a “kick-out clause” which will help protect them against a home sale contingency.
The house sale contingency clause: what does it mean for you as the buyer?
In many cases, buyers will need to sell their existing home so they can purchase a new home, especially if a buyer is looking to move into a more expensive home. Therefore, a home sale contingency provides buyers with the time they need to sell and close on their existing home before officially committing to buy a new home.
This helps buyers with avoiding owning two homes and having to pay two mortgages at once while they wait for their current home to sell.
While a home sale contingency can provide buyers with the peace of mind, it does not eliminate the other costs of buying a home. Buyers will still be spending money on home inspections, bank fees, appraisal fees, and other closing costs. And buyers will not be getting this money back if the deal falls through because the buyer’s existing home does not sell on time.
Additionally, buyers are likely to be forced to pay more for a property when they are making an offer that is contingent upon their current home selling than if they had made an offer without a home sale contingency. Buyers are likely to pay more with this contingency because in essence they are asking the seller to bet on the buyer’s ability to sell their current home and the seller is going to expect to be compensated for taking this risk.
The kick-out contingency clause as it relates to the house sale contingency clause
A “kick-out clause” is meant to help protect sellers when they accept an offer to buy their home that is contingent upon the potential buyer selling their existing home before they can purchase the seller’s home. A kick-out clause will allow buyers to market the property and accept offers from other potential buyers.
The seller would give the buyer a certain amount of time (such as 72 hours) to remove the home sale contingency so they can continue their contract. If the buyer is unable to remove the home sale contingency within a specified amount of time, the seller can back out of the transaction and sell their home to a new buyer.
The home insurance contingency clause
The home insurance contingency is a crucial contingency to add to your real estate contract. Lenders and sometimes sellers will require potential buyers to apply for and obtain homeowner’s insurance. This contingency clause is typically included with the fulfillment of conditions and requirements needed to make this happen that will be completed during the escrow process.
The home insurance contingency is meant to protect a potential buyer from property damage, such as fires, natural disasters, and other adverse events. However, actually obtaining homeowner’s insurance in certain regions might be harder than one might expect.
Insurance companies are becoming more reluctant to insurance properties in certain areas and regions. This contingency provides buyers with the option to back out of a transaction in the event that they are unable to secure homeowner’s insurance before closing.
Right to assign contingency clause
The right to assign a contingency clause is a common clause that real estate investors, especially, real estate wholesalers use. This contingency provides investors with the option to back out of a contract if they are unable to assign a real estate contract to another buyer within a specified amount of time.
In many cases, a real estate wholesale contract will include a legal document, the “Assignment of Contract” which specifies that you will be assigning the rights as the buyer in the Agreement of Purchase and Sale documents to another buyer. With a Right to Assign contingency, real estate wholesalers will be able to protect themselves in case a buyer defaults.
Title contingency clause
During the real estate transaction, a real estate attorney or title company will be doing a title search on the property. A title is important because it serves as a record of ownership and having a title is essential to selling the property. In many cases, any issues related to a home’s title can be resolved before a buyer goes to close on a home. However, there are some cases where title issues could cause challenges for potential new homeowners.
For instance, if there is a lien on the property that needs to be paid before the property is sold. There might be an ownership dispute if the seller is unable to legally prove that they do in fact own the property.
The title contingency is important because it protects potential buyers from these situations because it allows for potential buyers to back out of a sale if these title issues are not resolved before closing.
Things to keep in mind about contingency clauses
Most real estate contracts are contingent on three things:
1. The home inspection/due diligence contingency clause
This contingency clause ensures that buyers have the home inspected and have the chance to review the home inspector’s report before deciding whether or not they want to move forward. This is to help ensure that the buyers will be aware of any defects a home might have so they do not move into a home that is unsafe and/or has major structural issues. This is potentially one of the most important contingency clauses.
2. The financing/mortgage contingency clause
The financing contingency clause helps ensure a timeline for the closing of this sale. A financing contingency is meant to protect the buyer in the event that they are unable to receive sufficient financing that they will still be able to receive a total refund of the earnest money deposit they made when making an offer.
3. The appraisal contingency clause
This contingency clause helps protect the buyer in the event that when the property or home is appraised if its appraised value is lower than the previously agreed-upon sale price the buyer will be able to back out of the transaction. Ideally, in this scenario, the buyer would be able to receive a refund of their earnest money deposit.
Why you should carefully read and review any real estate contract before signing it
Additionally, it is important to remember that real estate contracts are legally enforceable contracts that define each party’s role and obligations’ in this transaction. Contingency clauses will be attached to the contract. You should make sure that you are checking for and reading all of the contingency clauses before signing anything.
When you are reviewing a real estate contract before signing it, you should take note of all of the specified dates and deadlines before signing anything. Time is of the essence in real estate transactions. You might think that one missed deadline and/or one missed day might be no big deal, but this is not the case. One missed deadline or one missed day with contingency clauses could have a negative and expensive impact on your real estate transaction.
Additionally, it is important to note that in some places real estate agents or brokers are allowed to draw up real estate contracts and any modifications including contingency clauses. However, in some places real estate contracts can only be prepared by a licensed attorney.
Regardless, no matter where you are located, an experienced real estate agent or broker will be there to guide you through this process. An experienced real estate or broker will also be there to ensure that these contracts are properly drawn up even if an attorney is drawing them up.
If you have any questions about real estate contracts or contingency clauses and you are not working with a real estate agent or broker, you need to speak with an attorney. The Agreement of Purchase and Sale (APS) documents are some of the most important documents you will encounter during a real estate transaction and you need to fully understand what you are signing before you sign anything.
The number of contingencies as a buyer that you include in a real estate contract
Finally, there is usually no limit to the number of purchase contingencies that you can add to your sales contract or Agreement of Purchase and Sale (APS) documents. Agreement of Purchase and Sale documents usually contain a lot of boilerplate and are pretty standardized.
If you are buying a home, you could theoretically include however many contingency clauses your heart desires. As a home buyer are legally allowed to include as many contingency clauses as you want.
However, it is possible that the more contingency clauses you include might make a seller less likely to want to accept your offer. As a buyer, you need to be careful with which contingency clauses you include and how many contingency clauses you include.
This is especially true if you are looking to buy in a hot market, with a lot of competition between buyers for homes and little inventory of available properties. If you have questions about contingency clauses, how many to include, which ones to include, and how to proceed when negotiating over contingency clauses speak with a real estate agent or broker who you trust.
Ideally, after reading this article you will have developed a clearer understanding of how real estate contracts work, how and why contingency clauses are important. Also, you should now have a clearer understanding of how contingency clauses in real estate contracts might affect you whether you are looking to buy and/or sell a home. It is important to remember that all real estate contracts which have contingency clauses are conditional. The contract will only be legally binding if certain tasks are completed or certain outcomes are avoided.
Given, that all real estate contracts or deals with contingency clauses are conditional, keep in mind that a real estate transaction will only be going through if contingencies are removed. In other words, nothing will be finalized until you sign the papers to close on a real estate deal. Until you sign the papers to close a deal nothing is guaranteed either way.
Therefore, no matter if you are buying or selling a home, you NEED to clearly understand what contingency clauses are and how they could affect you. Every single contingency clause should be clearly written into the contract so both the seller and buyer can understand. It is imperative that you have in writing what the contingency is and what happens if an action that needs to be completed is not completed and/or the desired outcome is not achieved.
If you have questions about your specific real estate contract or additional questions about contingency clauses consult a trusted real estate agent or broker and/or a real estate attorney.
You should never sign anything without reading it and fully understanding what you are signing. You should also never sign anything if you do not clearly understand what you are signing and what the implications of signing it could mean for you.
Related article: What are some negotiation tactics you can use to sell your home?
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