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Common contingency clauses used in real estate transactions

Real estate transactions can be both exciting and stressful. You might be ready to purchase your first home as a married couple or you might be getting ready to sell the family home after 20-plus years. Either way, you should know all about the various contingency clauses that can be included in the contract.

An appraisal contingency is included in every real estate contract. This contingency is based on the appraisal of the property that is on the market. If the appraisal comes in lower than expected, it allows the two parties to negotiate a new purchase price or allow the prospective buyer to back out of the contract without losing their money.

The financing contingency is used to make sure the buyer is able to secure financing for the purchase. This protects the prospective buyer and their money in the event they cannot find the money to buy the home. It allows them to cancel the contract without legal recourse.

The inspection contingency is added to protect the buyer. If the inspection results come back less than favorable, the buyer can choose to leave the contract without losing money.

The kick-out clause protects the seller. This clause allows the seller to keep the home on the market and seek other offers while the buyer tries to sell their current property. If the buyer cannot sell their property and has to back out, the seller is still in a good position since they were able to continue marketing their home.

Real estate contingency clauses are important to every single contract. The clauses discussed here might not always be applicable, but you should still learn what they cover in the event you need to add one to your transaction.

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