When it comes to purchasing a property, a purchase agreement is a crucial document that outlines the terms and conditions of the transaction. A purchase agreement is a legally binding contract that specifies the rights and obligations of the buyer and seller. It is important to note that certain conditions must be met for this agreement to be valid. In this article, we will discuss the two most common contingencies that are included in purchase agreements.
1. Inspection Contingency
The inspection contingency is a vital aspect of a purchase agreement. It allows the buyer to inspect the property thoroughly and determine its condition before making the final decision to purchase. The inspection may include a professional inspection of the property, including the plumbing, electrical systems, roof, foundation, and other structural elements. These inspections are designed to identify potential issues with the property that may affect its value, safety, or habitability.
If the inspection reveals any issues, the buyer may ask the seller to repair or replace the problem areas before the transaction is completed. Alternatively, the buyer may ask for a reduction in the purchase price to cover the cost of the repairs. If the seller is unwilling to make any necessary repairs or agree to a price reduction, the buyer can terminate the contract and receive their deposit back.
2. Financing Contingency
A financing contingency is also commonly included in purchase agreements. This contingency allows the buyer to secure financing to purchase the property. In most cases, the buyer will need to obtain a mortgage from a lender to finance the purchase. The financing contingency stipulates that the sale is contingent upon the buyer securing financing on or before a specified date.
If the buyer is unable to secure financing, they may be able to terminate the contract and receive their deposit back. However, if the buyer is able to secure financing, they will be required to complete the purchase according to the terms and conditions outlined in the purchase agreement.
In conclusion, a purchase agreement is a vital document that outlines the terms and conditions of a property purchase. Two of the most common contingencies included in purchase agreements are the inspection contingency and the financing contingency. The inspection contingency allows the buyer to inspect the property and identify any issues or problems before completing the purchase. The financing contingency allows the buyer to secure financing to purchase the property. Both contingencies are designed to protect the interests of the buyer and ensure a successful property purchase.