Purchase agreements are legally binding contracts between a buyer and a seller that outline the terms and conditions of a transaction. These agreements are crucial in protecting both parties and ensuring a smooth and successful sale. However, purchase agreements are not always set in stone and can be contingent on specific items. In this article, we will discuss the two main items that purchase agreements are contingent on.
1. Property Inspections
One of the most common contingencies in a purchase agreement is a property inspection. Before closing the sale, buyers have the right to inspect the property to ensure that it meets their expectations and is in good condition. This inspection usually covers the condition of the property`s structure, electrical, plumbing, and heating systems. If any issues are discovered during the inspection, the buyer has the option to request repairs or to negotiate a lower price.
The inspection contingency is crucial as it helps buyers avoid purchasing a property that has hidden and costly problems. On the other hand, sellers must ensure that their property is in good condition to avoid any legal disputes.
2. Financing
Another critical contingency in purchase agreements is financing. Most buyers rely on financing to purchase a property. Therefore, their ability to obtain a mortgage is a significant factor in completing the transaction. The financing contingency specifies that the sale is dependent on the buyer securing a loan from a lender. In the event that the buyer cannot obtain financing, the agreement can be terminated without any legal obligations.
Financing contingencies protect buyers from being liable for a property that they cannot afford. However, sellers prefer buyers who have already secured financing to avoid delays and uncertainty.
In conclusion, purchase agreements are legally binding contracts that outline the terms and conditions of a sale. These agreements can be contingent on specific items, the most common being a property inspection and financing. As a buyer or seller, it is crucial to understand these contingencies and their implications to prevent any legal disputes and ensure a successful transaction.
