How to Use a Contingency Clause to Protect Your Interests
If you’re working with a professional real estate agent, she’s going to know what contingencies to put in the contract to make sure you get protected as the seller. There are fairly common contingencies that you can make sure are included in a contract if you’re selling your home on your own without an agent.
You need to make sure that you protect your ability to stay in the home with a remain in clause often called the seller’s right to stay. This gives you a week to thirty days to stay in your house in the event that something’s going wrong with the house you’re buying or where you’re going to stay.
If you do this, then you’ll have to pay the new buyer rent for the days that you stay in the home. This should be covered in the contract. You’ll have to pay all the costs associated with staying in your home after it’s sold.
Because making home repairs are often contingencies set in real estate contracts, you can expect that you’ll be making some of those. However, you can put in the contract that you’re lowering the purchase price instead of repairing the items and that’s one of your contingencies.
You need to be very clear on the bottom line that you’re going to pay out if it’s in the contingencies that you’re going to pay for all the repairs. Because you might be thinking the cost of putting on a new roof is around $5,000 while the potential owner is expecting you to pay for a higher grade root and the cost is closer to $8,000.
If you don’t have it specifically spelled out with the amount you’re willing to pay (and no more) for these repairs, then the buyer could legally force you to spend more.
You want to make sure that the contingency states all that you’re willing to pay and that anything that’s over that amount is the buyer’s responsibility. Never put in there that you’ll make repairs “to the buyer’s satisfaction” because you’re giving them the right to continually force you to make a repeated repair until they deem it’s done.
Don’t give a buyer that kind of control. One of your contingencies should be the right to void the contract. If the potential buyer has agreed to certain terms and then isn’t following through, you want to be able to walk away from the deal without repercussions.
You may want to have a multiple offer clause in your contingencies as well. This allows you to accept more than one counter offer and gives you the freedom to pick which buyer gets the house.
What this does for you is gives you the right to up the asking price of your home if you end up in a bidding war. Make sure that you have a contingency in the contract for the potential buyer’s financing.
If it falls through, you don’t want to be stuck in a contract while he scrambles trying to find new financing. This could tie your home up for months. You need a way to protect yourself from that.
