You have to deal with many variables when buying a home in Connecticut. Buyers need time to confirm the value and physical condition of a house. For these reasons, buyers often use contingency clauses in purchase contracts to protect their financial interests. In general, a contingency clause contains terms that must be satisfied for the contract to remain binding. An inability to satisfy the contingency clause allows you to back out of the deal.
Why contingency clauses are used
Buyers draw upon several types of contingency clauses to protect their earnest money and assure themselves that they understand the value of a home correctly. When a seller accepts your offer, you have to present earnest money to prove that you are serious about the deal. Backing out of the deal without an unsatisfied contingency to lean on forces you to forfeit your earnest money.
Without contingencies, many buyers would not be able to proceed with confidence. They might risk financial obligations that they cannot meet should the house need expensive repairs or not appraise high enough to get a loan.
Common types of contingencies
Although a real estate contract can include any custom clauses that both sides find acceptable, some contingencies are very typical for buyers, such as:
- Appraisal contingency
- Financing contingency
- Inspection contingency
- Home sale contingency
An appraisal contingency outlines the minimum appraised value necessary for the buyer to proceed. Almost all buyers need a financing contingency, which grants them 10 to 60 days to get a loan. Inspection contingencies give buyers time to obtain a professional opinion about the structural status of the home and evaluate expenses for necessary repairs. You would use a home sale contingency when you are waiting to close on the sale of your previous home before you can pay cash or finance another home.
