Real Estate Contract Contingencies
Overview of Contingencies Used in Oklahoma Real Estate Contracts
Contingencies play a pivotal role in safeguarding the interests of both buyers and sellers. These contractual provisions, often seen as conditional clauses, grant parties the flexibility to navigate through the complexities of real estate deals with confidence. These are the different types and goals of contingencies in real estate contracts, and the most common terms employed by buyers and sellers.
Legal Effect of Contingencies
First, all parties to a real estate contract should know their legal rights at all times throughout a transaction. This can be complicated depending on the contingencies used, since contingencies can become satisfied, triggered, or expired without warning – this is based on the language used in the contingency term.
As the transaction continues, contingencies often must be waived, terminated, timed-out, or released by the party holding the contingency.
Common Buyer Contingencies
- Inspection contingency: This is a standard contingency in Oklahoma real estate purchase contracts provided by the Oklahoma Real Estate Commission (OREC). Buyers use this clause to conduct a thorough inspection of the physical condition of the property and ensure value and habitability are satisfactory. Buyers can use their inspection results to negotiate repairs or withdraw from the transaction if done so on time.
- Financing contingency: Buyers who plan to obtain a mortgage in order to purchase their property should use a financing contingency. For residential buyers, OREC has published a specific financing contingency form. If the buyer does not qualify for the expected financing, the deal should be terminated.
- Appraisal contingency: A property’s appraised value can significantly impact the mortgage loan amount. Buyers should include an appraisal contingency to ensure that the property is appraised at a value equal to or greater than the agreed sale price. If the appraisal comes up short of the sale price, the parties can renegotiate, find another lender, or terminate.
- Title contingency: A title inspection contingency is a standard clause in OREC’s real estate form contracts, as a sale should not be closed without sufficiently marketable title.
Common Seller Contingencies
- Home sale contingency: Some sellers want to use a home sale contingency when they are simultaneously buying another property. If unable to secure a sufficient replacement property within a specified time, the seller may have the right to terminate the initial agreement.
- Home inspection contingency: Similar to the protection for buyers, a home inspection contingency can help ensure that appraised value meets the sale price.
- Kick-out clause or right of first refusal: Sellers may have or may be subject to a right of first refusal for a given property. If a seller receives an offer from a buyer, they may have to submit that offer to a third party and give a chance to match or exceed the initial offer.
Work with experienced Oklahoma real estate attorneys.
Buyers and sellers each need experienced real estate professionals on their team. The attorneys of Avenue Legal Group guide clients through the complexities of contingencies and complex real estate transactions. Contact us to discuss your real estate transaction.
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