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Contingency Clauses When Buying Real Estate

Before you close a real estate deal and sign the papers, it's a good idea to have a contingency clause in place.

A contingency clause protects the buyer from any unknown risks that might arise before the offer is finally closed and or if there's something wrong with the property that wasn't found when the property was inspected and appraised.

Here are some things to think about and questions to ask when making an offer to purchase property and before finally signing the contract to buy the property - these are things that should be covered through a contingency clause.

  • For your first offer price, make it simple and clearly stated offer that doesn’t have to be read by an attorney.
  • Will anything be included that can be negotiated, furniture or amenities that aren’t permanent?
  • Outstanding rents – rent arrearages. As the new buyer you don’t want to end up having to pay to go after a renter who’s behind by a number of months. Know the status of all of your tenants.
  • Whose insurance covers the property in the exchange between owners, if there’s any damage to the property or fire, earthquake or flood?
  • You’ll need access to the property before it closes to show it to potential tenants or to make repairs.
  • Condition of the property must be in the same state when you take over.
  • Inspect all units, don't skip.  Many times you’ll only gain access to a few units but before purchase, see all of the units.
  • Final inspections.
  • Compliance with codes.
  • What are the HOA or cummunity rules and regulations about additions or making remodeling a property.
  • If there are problems such and mold, bug infestations and or water damage that wan'st seen in the inspection, correcting this problem will be covered by the property seller.
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