Even though you may not think in terms of making a contingent offer when you write a purchase agreement to buy a home, most purchase agreements have contingencies of some kind… most for the protection of the buyer.
Some examples of contingencies are…
- Subject to inspection – this is a very common contingency, including whole house inspection, radon, moisture, mold, asbestos, structure, lead-based paint, etc. – buyer can ask seller for repairs or cancel the agreement and have earnest money refunded after the inspection
- Subject to financing – including satisfactory property appraisal, title review and final underwriting approval – if buyer cannot obtain financing purchase agreement is canceled and earnest money is refunded to buyer
- Subject to review of association documents – including governing documents, financials, rules and regulations, HOA certification, repair-replacement plan, etc – in MN buyer has 10 days to review documents and can cancel at any time during that period and have earnest money refunded
- Subject to short sale approval – purchase agreement is signed by buyers and sellers, then sent to the bank(s) holding the mortgage(s) for short sale approval negotiations to accept less than full loan payoff amount as payment in full – if bank doesn't approve the short sale, purchase agreement is cancelled and earnest money is refunded to buyer
- Subject to well water testing or sealing, septic inspection – results are not satisfactory, buyer may cancel and have earnest money refunded
- Subject to sale of existing home – removal of this contingency requires a signed purchase agreement for the sale of the contingent property, not contingent upon anything other than financing and with a closing date not later than the closing date in the contingent purchase agreement
- Subject to cancellation of a previously written purchase agreement – seller and/or buyer may have a signed agreement with another party which has 'fallen through', but the official cancellation has not yet been received – if this contingency is not removed, purchase agreement is cancelled and earnest money is refunded to buyer
Most contingencies are removed and some simply expire, but both buyers and sellers should be aware that the purchase agreement is not officially binding until all contingencies are removed. That is why so many purchase agreements include a date by which all financing must be completed and a written statement issued that it is clear to close.
Sharlene Hensrud, RE/MAX Results - Minneapolis-St. Paul Buyer's Agent