When you are buying real estate in New York City, you want to be sure that the property will live up to your expectations, particularly if you want to use it to generate income. Sometimes unexpected problems complicate a purchase, and you may have second thoughts about going through with the deal.
Your purchase agreement could offer you crucial protection by providing one or more contingencies. By making sure your agreement contains these clauses, you will have a layer of security against events that make a purchase undesirable.
How contingencies work
The idea of a contingency clause is to set terms for your purchase. For example, you may want a home to pass an inspection before you finalize the deal. Bankrate explains that a contingency allows you to withdraw from a purchase because of a failure to meet contingency terms.
Your seller might offer a contract with contingencies in place, but you will likely have to negotiate for particular contingencies that you want in the agreement. Both you and the seller must agree to the contingency. Once you and the seller sign the agreement, the contingency will take legal effect.
Types of contingencies
There are many kinds of contingencies that can go into a purchase agreement. A home inspection contingency allows you to walk away if the home fails an inspection and the seller elects not to pay to repair the defects. A title contingency requires a property to pass a title search and the seller to clear any defects in the title.
Some contingencies deal with financing. A mortgage contingency permits you to withdraw if a bank does not approve a loan for you before a certain deadline. An appraisal contingency requires the appraised value of the property to match the sales price. Some banks do not approve mortgages for properties that cost more than their actual value, so an appraisal contingency may give you further protection if you cannot secure financing.
Negotiate contingencies carefully
Sellers may want to include specific contingencies to protect their interests, so be aware of these contingencies in your purchase contract, particularly if you have concerns about them. Also, a seller might be reluctant to sign an agreement with too many contingencies in it. These are issues you will probably deal with during a New York City real estate purchase.