George Clements ~ Greenville, SC Real Estate
Paragraph 5 of the Contract for Sale deals with contingency. The paragraph looks something like this:
5. CONTINGENCY: The obligation of the Purchaser to purchase is also contingent upon: ____The Property
appraising for not less than the sales price as determined by lender’s appraisal or other appraisals obtained by the Purchaser. ____The Purchaser completing the sale and closing of Purchaser’s home located at___________________________________ ____House is under contract and due to close on or before_____________________ ____House is not under contract. (Addendum Regarding the Contingency Attached: ____Yes ____No)
This paragraph deals with things that have to happen in order for the house to close.
The first one that can be checked is that the property has to appraise for not less than the sales price. Most lenders will require that an appraisal be done and that the appraisal needs to be the same or more than the purchase price amount. Lenders want to make sure that they are not lending out more money than the home is worth. If the purchase price were $200,000 and the appraisal came in at $190,000, then the purchaser is not obligated to buy the property and will receive the earnest money back. The purchaser and seller can agree to lower the price to match the appraisal and change the contract.
The next contingency deals with another home that needs to be sold. It basically says that if the property that the purchaser is selling does not sell then they are not obligated this contract. There is a place to list weather the puchaser's property is under contract or not and what the address is. A contract with a contingency like this without the purchaser's property being under contract is not as likely to be accepted by the seller.
The last blank allows for a special situation to be listed which the purchaser or seller need to have the contract contingent on.