The last of the important terms that are often contained within the Purchase Agreement are contingencies. Contingencies are certain things or terms that must be satisfied in order for the purchase and sale to go through. That is, the sale is dependent upon certain things occurring.
The most common contingency within a Purchase Agreement is that the purchase of the property is contingent upon the buyer receiving adequate financing. This contingency is rather important given the fact that most buyers do not purchase Real Estate with cash, they get mortgages. Thus, with a paragraph in the Purchase Agreement that states that the purchase of the property is contingent upon the buyer receiving adequate financing, if the buyer is not able to secure adequate financing, the buyer is relieved from their further obligations under the Purchase Agreement, and usually gets the return of their earnest money, or at least a good chunk of it.
Another common contingency that is placed within Purchase Agreements is that the purchase and sale is contingent upon the sale of some other piece of Real Estate. More often than not, this contingency is placed on behalf of the buyer and deals with the ability of the buyer to sell some other piece of Real Estate that the buyer already owns. Usually, a contingency on the sale of another piece of property is used in the Residential Real Estate world. Often buyers in the Residential Real Estate market are sellers in the Residential Real Estates market at the exact same time, as they are selling their current home. Not too many people like to be saddled with multiple homes at the same time, especially because that often means multiple mortgages, two sets of utility bills, and multiple property tax payments. So, one answer to this problem is to simply make the sale contingent upon whether or not the buyer is able to sell their current property within a given amount time.
There are many other contingencies that are relatively common. Many have to do with certain repairs that the buyer has requested the seller make to the property. Others make the sale dependent on the seller taking care of some issues with the title company. Another common contingency is to make the sale dependent upon a favorable inspection report. Still more can make the sale contingent upon the ability to acquire an easement, variance, or zoning approval.
Ultimately, both buyers and sellers alike have the ability to place contingencies within the Purchase Agreement in order to protect their own interests. These contingencies can concern just about anything you could think of. That being said, buyers and sellers alike should be very careful in their choice of contingencies and how each is worded, because in a dispute over what the buyer and seller intended and what was actually written down it will be difficult to enforce the intent over the writing.
Common Terms in a Purchase Agreements