The sales contract and contingency clauses
A buyer’s offer to purchase a home is presented in the form of a sales contract (officially know as a Purchase and Sale Agreement). This is a five page legal document, the main elements of which are:
• Identification of the parties in the transaction, plus a legal description of the property.
• The offer price and method of payment (cash or loan). Also states the earnest money amount.
• States the type of deed and the condition of the title.
• Any attached contingency clauses.
• Includes the date of transfer of possession and title to the property to the buyer.
The buyer fills out the sales contract paperwork with the help of their agent. Do not let your agent dictate what goes on the paperwork. Definitely listen to their advice, but all final decisions should be yours to make! If you are not sure what you are signing, have your agent clearly explain to you what the paperwork means. This is important stuff! The agent will then send the offer to the listing agent who then presents the offer to the seller. The offer must be in writing and signed. Verbal agreements are not legal for real estate transactions in the Washington State.
The initial offer from the buyer will have a stated deadline within which time the seller can respond to the offer. The seller is not obligated to respond to the offer. Once that period has elapsed, and no action has been taken by the seller, the offer is considered no longer valid. However, if the seller accepts the offer as is great. More than likely, the seller will come back with a counter-offer and the negotiation process continues.
Contingency clauses are there to protect you
Contingency clauses are various conditions that need to be met in order for the sale to go through. They are there to protect you, the buyer. For example, the inspection contingency protects you from buying a lemon house and the financing contingency means that you are not forced to buy the home if you are declined financing by a lender. They are part of the whole contract / offer that you submit to the seller. The conditions of these clauses must be met before the sale can go through to closing. However, once the conditions of a contingency clause(s) have been met, then the agreement must be honored and the sale must go through.
The most common contingency clause are:
• Financing contingency means that the buyer needs to secure financing from a lender to b able to purchase your property. This protects the buyer in the event that they are unable to secure a loan.
• Sale of property contingency means that the buyer has to sell their own home first before they can buy the new property.
• Appraisal provision allows the buyer’s lender to carry out an appraisal of the property to assess whether the property is worth the agreed to sale price.
• Inspection contingency allows the potential buyer to carry out a full inspection of the property at their own expense to determine its structural soundness.
