When closing on real estate, you need to avoid trapping yourself into an agreement you struggle to get out of. To do this, you need to include the proper contingency clauses.
Contingency clauses are conditions you place on the purchase. You say you will agree to buy but retain the right to walk away in specific instances.
Purchasing real estate without contingency clauses is a huge risk
Contingency clauses are not obligatory, yet it would be foolish not to take advantage of them. When you agree to buy a property, you expect a few things to happen:
- The seller needs the right to sell the property: Most real estate has a clean title where the ownership is clear. Yet you always need to check. If you find issues when doing a title search, you may still be able to clear them up and proceed to buy.
- You need to know and accept the property’s defects: Professional surveys are necessary when buying real estate. They can turn up problems with the land or the buildings on it. You may be happy to accept these, use them to negotiate a lower price or withdraw from the purchase.
- You need to insure the property: An insurer will want to see the survey results before giving a final decision. If you cannot get insurance, you are unlikely to get a mortgage.
- You need to be able to pay for the property: While your mortgage lender should have given initial approval, they could change their mind. They will need to appraise the piece of real estate and ensure they agree with its valuation, double-check your finances and take other steps before giving funding.
The real estate market is full of traps for the unwary. Unscrupulous sellers rely on unsuspecting victims falling into these traps to shift properties that would otherwise be difficult or impossible to sell. Ensure you have the necessary legal protection in place so that closing on your real estate purchase goes well.