When purchasing a property or any valuable asset, it is common for a purchase agreement to be put in place to ensure that all parties involved are legally bound to certain terms and conditions. However, it is important to note that these purchase agreements are often contingent on certain items being met before the sale can be completed.
So, what exactly are these contingency items that are often included in purchase agreements? Here are the two most common items:
1. Financing Contingency
One of the most important factors in any purchase agreement is the financing contingency. This contingency states that the sale of the property is contingent on the buyer obtaining the necessary financing to complete the purchase. This means that if the buyer is unable to secure financing, the sale will not be completed, and the buyer will not be held liable for any penalties or fees.
In most cases, the financing contingency will specify a certain percentage or amount of the purchase price that the buyer must secure in financing. It is important to note that financing contingencies are often time-sensitive, meaning that the buyer must secure financing within a certain timeframe to avoid jeopardizing the sale.
2. Inspection Contingency
Another key item in purchase agreements is the inspection contingency, which allows the buyer to have the property inspected by a professional before the sale is completed. This contingency ensures that the buyer is aware of any potential issues or defects with the property and can use this information to renegotiate the terms of the sale or even back out of the purchase entirely.
Typically, inspection contingencies specify a certain timeframe within which the inspection must be completed, and any issues discovered during the inspection must be resolved before the sale can proceed. This ensures that both the buyer and seller are aware of any issues with the property and can make informed decisions.
In conclusion, purchase agreements are critical documents that protect both the buyer and the seller in the sale of valuable assets like properties. While there are many different items that can be included in purchase agreements, the two most common contingency items are financing and inspection contingencies. By ensuring that these items are met before completing the sale, both parties are protected and can proceed with confidence.