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Intro to NJ Real Estate Contingencies

Contingencies in a real estate contract are more specific items not covered by the general purchase contract. Here, we take a look at some contingencies buyers and sellers should consider as they review the purchase contract.

On Behalf of Veitengruber Law | Jun 30,2023

In every real estate transaction, there is a purchase contract. This contract determines the terms of the transaction, including the responsibilities of all parties involved. This legal document will fully dictate exactly what and how you purchase or sell a property, so this document must be detailed, accurate, and thorough. When you receive this document, you will want to go through it line by line to make sure you agree with everything in the document before you sign. One section of this document is called contingencies.

Contingencies in a real estate contract are more specific items not covered by the general purchase contract. These are conditions that must be met for the sale to proceed. Buyers and sellers can submit contingencies. If an aspect of the sale is essential to your proceeding with the sale, it must be included in writing as a contingency in the purchase contract. Otherwise, it cannot be upheld in the deal.

There are common contingencies that appear in many real estate contracts and also situation-specific contingencies for more nuanced circumstances. Here are some contingencies buyers and sellers should consider as they review the purchase contract:

1.    Financing Terms

For buyers financing the purchase of a home, including a financing contingency is a great idea. This kind of contingency will protect the buyer if they cannot secure the financing they need to purchase the home. If a buyer needs a specific type of loan or interest rate in order to afford the property, these kinds of specifications need to be spelled out in the contract. A real estate attorney can advise you on financing terms to include in the agreement.

2.   Closing Costs Responsibilities

Buyers and sellers are responsible for different closing costs depending on what kind of real estate transaction occurs. It is also possible for the buyer or seller to negotiate closing cost responsibilities based on their needs. For example, buyers can offer to pay a higher home price to the seller if the seller agrees to help cover some closing costs. Sellers can negotiate with buyers on home repairs by offering to cover additional closing costs. However it is agreed upon, the contract will need to specifically indicate who is responsible for escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax, and any other closing costs.

3.   Home Inspection

Home inspections are an essential part of any real estate transaction. Unless the buyer plans to completely tear down the structure on the property, a home inspection contingency should be included in the contract. A home inspection will uncover any problems with the home, from chipping paint to major structural damage. A home inspection report will help you determine the cost of repairs now or in the near future. A home inspection contingency will allow the buyer to back out of the deal if the home inspection uncovers any significant damage or major issues that cannot be resolved prior to closing. The inspection clause should detail how negative inspection findings will be dealt with between buyer and seller.

4.   Fixtures and Appliances

All fixtures, appliances, furniture, or other home features that are or are not included in the sale and transfer of the property need to be listed in the purchase agreement. Verbally agreeing to what will stay or go in the property is insufficient. These understandings need to be spelled out in the contract. Sellers can often work with buyers to allow them to maintain specific fixtures or items in exchange for a higher sales price.

5.   Closing Date

Buyers and sellers both have different needs when it comes to the closing date. Sellers may need time to find a new place to live. Buyers may need the funds from selling their old property to purchase the new property. Whatever the reasons, the closing date needs to be clearly stated in the contract. Standard closing time frames are 30, 45, or 60 days. But, if there are extenuating circumstances, these time frames can be lengthened as long as both parties agree. You can even include specific contingencies around when the buyer can move in or when the seller needs to be moved out.

The above are common contingencies that are included in most purchase contracts. But as any real estate professional will tell you, contingencies can get very specific and out of the box. If you want the favorable opinion of a feng shui specialist before going through with a home purchase, you can add that to the purchase agreement. Remember that for the contract to be finalized, the other party must agree to your contingencies, and some out-of-the-box requests may result in a rejected contract. However, if something is important to you, discussing with a real estate attorney how to best include these terms in the agreement is a good idea.

In New Jersey, you are allowed a three-day attorney review period during which a real estate attorney can go over the purchase contract with you, and you can present any concerns or propose contingencies. Veitengruber Law is an experienced NJ real estate law firm. We can help you understand what contingencies mean for you and how you can use them to maximize your investment.


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