What Is a Contingency in Real Estate?

A contingency in real estate is a condition that must be satisfied before the transaction becomes final. Contingencies are designed to protect buyers and sellers during the purchase process. Common contingencies include: Home inspection contingency. Mortgage financing contingency. Appraisal contingency. Sale of existing home contingency. Title contingency. If a contingency is not satisfied, one or both parties may have the right to terminate the contract without penalty.

What Happens If a Seller Backs Out of a Contract?

When a seller backs out of a contract, the consequences depend on the terms of the agreement and the reason for the cancellation. In some situations, the buyer may be entitled to: Return of deposits. Reimbursement of expenses. Monetary damages. Specific performance, which is a court order requiring the seller to complete the sale. Because purchase agreements are legally binding contracts, buyers and sellers should consult with a real estate attorney if a dispute arises.

Who Pays Closing Costs?

Both buyers and sellers generally pay closing costs, although the exact division varies depending on local custom, negotiations, and the terms of the purchase agreement. Buyer closing costs commonly include: Loan fees. Title insurance premiums. Recording fees. Escrow deposits. Prepaid taxes and insurance. Seller closing costs often include: Real estate commissions. Attorney fees. Transfer taxes. Mortgage payoff amounts. Various prorations and adjustments. Closing costs are disclosed before closing so both parties understand their financial obligations.

Real Estate Contract Termination - Lawyers Glastonbury, CT Kane, Hartley, Kane

Real Estate Contract Termination

Getting Your Deposit Back

When you’re in the process of buying a home, changing circumstances may compel you to cancel the deal. While you can terminate a contract at any time, you risk forfeiting your deposit. If you need to terminate your agreement and get your deposit back, specific contract contingencies may limit your options.

If you find yourself in this position, our real estate lawyers can assist you. We can take steps to help you navigate contract contingencies and recover your deposit from the seller.

Two Standard Contingencies Protect Your Deposit

Most standard real estate contracts follow Multiple Listing Service (MLS) Realtor guidelines. They contain two key contingencies that allow a buyer to terminate and receive a refund of their deposit.

The Mortgage Contingency Date

This is the “drop dead date” by which the buyer must secure a mortgage commitment.

Buyer’s Right

If the buyer is unable to secure a mortgage commitment, they may terminate the contract by providing timely notice to the seller.

The Deadline

This date is firm. If the buyer fails to notify the seller of their inability to obtain a mortgage on or before the date set, the contract remains in force.

Extensions

The buyer may request to have the date extended, but this requires the seller’s agreement.

The Home Inspection Contingency

This contingency reserves the buyer’s right to conduct a home inspection, typically within 14 days of the seller’s acceptance of the offer.

The Review

The inspection typically covers plumbing, electrical, and structural areas. It may also include tests for radon, termites, mold, and other conditions.

The Requirements

Within the agreed-upon timeframe, the buyer must conduct the inspection and notify the seller of any deficiencies found. The buyer must also propose how the deficiencies should be remedied.

Termination Right

If the buyer doesn’t find the inspection results acceptable, and the parties can’t agree on a resolution within the time allowed, either party may terminate the contract. The seller must then refund the deposit to the buyer. This is also a “drop dead date” that requires strict compliance.

Non-Standard Contingencies

Buyers may also insert special, non-standard conditions into real estate contracts. These may allow for a buyer to terminate without losing their deposit.

Appraisal Contingency

The buyer reserves the right to terminate if the property does not appraise at or above the purchase price.

Attorney Review Contingency

The contract is subject to review by the buyer’s attorney within a set number of days. The buyer may terminate the agreement during that time after consulting with their attorney.

Sale of Current Home (“Hubbard Clause”)

The purchase is contingent upon the buyer successfully selling their current house.

Protecting Your Deposit

If factual issues arise that affect compliance, these contingencies won’t always guarantee agreement. Before signing a contract or attempting termination, consult with our real estate attorney. We can review all elements of your contract to ensure they protect your interests.

Frequently Asked Questions

What Is a Contingency in Real Estate?
A contingency in real estate is a condition that must be satisfied before the transaction becomes final. Contingencies are designed to protect buyers and sellers during the purchase process. Common contingencies include:
- Home inspection contingency.
- Mortgage financing contingency.
- Appraisal contingency.
- Sale of existing home contingency.
- Title contingency.
If a contingency is not satisfied, one or both parties may have the right to terminate the contract without penalty.
What Happens If a Seller Backs Out of a Contract?
When a seller backs out of a contract, the consequences depend on the terms of the agreement and the reason for the cancellation. In some situations, the buyer may be entitled to:
- Return of deposits.
- Reimbursement of expenses.
- Monetary damages.
- Specific performance, which is a court order requiring the seller to complete the sale.
Because purchase agreements are legally binding contracts, buyers and sellers should consult with a real estate attorney if a dispute arises.
Who Pays Closing Costs?
Both buyers and sellers generally pay closing costs, although the exact division varies depending on local custom, negotiations, and the terms of the purchase agreement. Buyer closing costs commonly include:
- Loan fees.
- Title insurance premiums.
- Recording fees.
- Escrow deposits.
- Prepaid taxes and insurance.
Seller closing costs often include:
- Real estate commissions.
- Attorney fees.
- Transfer taxes.
- Mortgage payoff amounts.
- Various prorations and adjustments.
Closing costs are disclosed before closing so both parties understand their financial obligations.

Real Estate Attorneys in Glastonbury

The process of buying or selling a home can be one of life’s greatest adventures. It can also be a legally overwhelming transaction for all parties involved. When you contact Kane, Hartley & Kane before you execute a real estate contract, we can ensure that it protects your legal and financial rights.

Lawyers in our office in Glastonbury work with real estate clients in Hartford, Middlesex, and Tolland Counties, and throughout Connecticut. Before you commit to buying or selling a home, call us at (860) 633-3651 or leave a message on our contact page.

CALL US: (860) 633-3651