Here Is an Explanation of What a Contingency Entails In the Context of Houses for Sale in Kanata

When selling a property, a purchase agreement must be created between the buyer & the seller, containing numerous clauses that must be fulfilled to enable a successful property sale. In case any of the contingencies mentioned in the agreement are not met, either party can simply exit the agreement without facing any legal or financial consequences. Therefore, contingencies hold immense significance when buying houses for sale in Kanata.

There can be a number of Contingencies in houses for sale in Kanata:

There are many different types of contingency clauses in real estate transactions, though some are more common than others.

1. Mortgage Approval Contingency

The purchase contract usually outlines that the sale will only proceed in case the buyer's mortgage is approved within terms that closely match the contract. For instance, in case a contract indicates a 30% down payment with a 30-year conventional loan, then the lender needs to approve these terms. Typically, here the lender approves the terms mentioned in the contract, but occasionally the purchaser may receive a different loan proposal, leading to some changes in the terms.

2. Appraisal Contingency

If a buyer includes an appraisal contingency in the purchase agreement, it gives them the option to withdraw from the transaction in case the property's appraisal value is less than the agreed-upon selling price. In such cases, both parties may need to renegotiate the price, with the seller potentially reducing it to match the appraised value. However, in a seller's market, the buyer may choose to forego the contingency/cover the shortfall with cash since lenders cannot approve loans beyond the property's appraised value.

3. Closing Date

The closing of a transaction is commonly dependent on a specific date. While the seller has the option to withdraw, in practice, the closing date is often postponed. Nevertheless, if the seller has received a higher offer from another party, they may choose to enforce the contingency clause to terminate the current agreement and accept & simply move on with a more favourable offer.

4. Inspection Discoveries

Inspection contingencies have due dates with requirements, thus allowing the buyers to demand repairs or new terms in case any problems are found during the inspection. If the terms are not met, the buyer can opt to walk away from the deal.

5. Satisfactory Walk-Through

The contract may require a final walk-through of the property before closing in order to ensure no new damage has occurred & any agreed-upon repairs have been made.

The Bottom Line

It's normal to see numerous contingencies in a real estate contract and transaction and it is all related to the bargaining back and forth. Where some contingencies are still more standard than others and appear in every single contract and on the other side there can be fewer contingencies in an agreement.