Real estate transactions often include contingency clauses. These are used when a potential buyer makes an offer. They will have certain contingencies that have to be met in order for their offer to stand.
For example, a contingency clause regarding financing is fairly common. If the buyer does not get the loan that they are expecting from their mortgage lender, they are not obligated to try to purchase the property anyway. Another is for home inspections. The offer is only good if the home passes the inspection.
Why would you remove a contingency clause?
Removing any contingency clause is a risk. It opens the buyer up to the potential that they won’t get everything they expect or that the transaction won’t go smoothly. Maybe the house fails the inspection, so the buyer still has to purchase it – but knows that they are facing $20,000 in maintenance and repairs once they become the owner.
But some people will take this risk, and the reason is that they think there is a better chance the seller will choose their offer. Say that there are 10 offers on a home, and all of them have inspection contingencies—except for one. If the financial compensation is the same, the seller may be more likely to take the offer without the inspection contingency simply because it is more likely that the deal will go through.
It is important to understand how home purchase contracts work, and contingencies are just one part of that. Be sure you know what legal steps to take if you’re going through a real estate transaction.