Before creating real estate deals in Ohio or any other state, you should know what the different contingency clauses are. A contingency clause allows the buyer or the seller to back out of a deal when certain criteria, such as getting a home inspection within 15 days, are not met.
Breach of contract and co-owner disputes are common reasons behind real estate litigation from the commercial side in Ohio. You must have every part of your agreement in writing as it makes litigation easier.
1. Financing contingency
When you’re drafting a real estate deal, you’ll usually want to include a financing contingency. This type of contingency allows the buyer a certain amount of time to secure financing. As a buyer of real estate, you should clearly state in the contract that you can receive your earnest money back if you fail to secure financing in time.
Some buyers and sellers include a clause that gives the buyer the option to request an extension in securing financing. You may want to consider that as the buyer in case it takes more time than you originally thought to get enough money for the property.
2. Appraisal contingency
An appraisal contingency promises that the property has at least a certain specified value. If the property has a lower value, then the buyer could back out of the deal without repercussions. You can include terms in the contract that allow the buyer to still buy the property if it turns out to have a lower-than-promised value. Give a time-frame for the buyer to complete the purchase so that your property isn’t tied up for a long time.
3. Kick-out contingency
Sellers may want to add a kick-out contingency, which means they have the right to continue marketing the property. It helps protect them if a buyer backs out of a deal. They can quickly have another buyer ready to complete the transaction. Your contract can have both a home sale and a kick-out contingency. These are essentially time limits that protect both the buyer and the seller from another who takes too long and otherwise causes trouble.
Make sure to take these three important real estate contingency clauses into consideration when negotiating a deal. You could consult with a real estate lawyer to get a better understanding of the law that affects what you can and can’t do during real estate deals.