From the buyer’s perspective, any payments made should be credited to the purchase price if it proceeds to closing, as, at that point, the risk to the seller has been mitigated. Some examples: 1. Appraisal: The buyer won’t be obligated to buy the home if the appraisal value is lower than the asking price. "Purchaser’s obligations under this Agreement are contingent upon its receipt of a satisfactory report regarding the environmental conditions directly and/or indirectly affecting the Property. The contract language should also address appeals of any action by the jurisdiction. • Clause 25—Warranties and Representations: Unless something to the contrary is included in the P&S, this clause states you are not relying on anything the Seller and their agent told you. HOLDING CHECK CLAUSE Avoid holding a check for an earnest money deposit. If the contract allows the buyer to pursue an outright rezoning of the property, the seller should ensure that this is the final contingency, and should offset this risk with additional deposits from the buyer when all other contingencies have been satisfied. For example, let’s say you find a warehouse at the edge of a popular urban neighborhood that has a mix of baby boomers and millennials. With proper forethought and investigation into land use matters, buyers and sellers can avoid being shackled to a contract that turns out to be a vastly different deal than the one they bargained for. For example, the adoption of a zoning map amendment, which generally includes proffered conditions by the applicant, would bind the seller and any successive purchaser in the event that the buyer does not close on the purchase of the property. A purchaser’s title and survey language should be detailed and somewhat extensive in order to adequately protect the buyer against a variety of potential title and survey concerns. If an environmental conditions contingency is demanded by the purchaser, Seller should seek to limit Buyer’s discretion in determining the satisfactory nature of the Phase I report. The satisfactory nature of any such report shall be determined in the sole discretion of Purchaser. Furthermore, it would be beneficial to disclaim any known environmental conditions. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. As the economic environment for real estate transactions improves, the land use entitlements associated with real property will continue to play an important role in the negotiation of a purchase contract, both from the perspective of the buyer and the seller. 3. As one might expect, a financing contingency dictates that the purchaser’s obligation to close on the transaction is contingent on their ability to acquire appropriate (and/or desirable) financing of the purchase price. As you can see, there is a lot to consider in just this clause. With terms agreed upon and both parties’ signatures affixed, the purchase agreement is really more the starting point than the end goal in a real estate transaction. Somewhere between Seller’s simplistic ideal and Buyer’s unduly contingent ideal must be found enough common ground to keep both parties committed, satisfied and confident in the terms of the transaction. Purchaser shall have ___days from the execution of this Agreement to obtain the Approvals from the appropriate entities. Indeed, it is the ability of the Buyer to carve out these “escape clauses” that will give them enough comfort to commit to the purchase while retaining enough skin in the game to keep Seller satisfied that closing will more than likely occur. Loan contingency: Further investigations concerning the property or the borrower sometimes result in denail of a mortgage application—even if the buyer has a loan preapproval letter. Our practice includes resolution of land use issues through lobbying for legislative changes, arbitration and litigation. Contingency implies a promise to use one’s efforts to bring it … Zoning Contingencies. In the event Purchaser fails to obtain adequate financing, Purchaser may provide notice to Seller witin this ___ day period and terminate this Agreement. Whether you’re a service … Some loan contingencies run all the way to closings, and other types might exist for a few weeks. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. While a Buyer must look at the potential deal-breakers to determine what sort of contingencies they will push for (or demand), a Seller must have an understanding of how far it is willing to bend to make the deal happen. For example, some additional considerations which might require purchase agreement contingencies in a particular transaction could include the following: While the above discussion of contingencies together with the extensive suggested language provides a meaningful framework for how to approach buyer’s contingencies, each transaction and each purchase agreement is unique. Essentially, Buyer Beware. If you have a clause that you would like to share, use the Comments section following the article. Purchaser shall have a reasonable amount of time to obtain the Approvals from the appropriate entities, which shall be no less than ___ days from the execution of this Agreement. In most cases, buyers and tenants should begin investigating what approvals will be necessary and the amount of time required … When you add this up, you are looking at a minimum of 150 days or 5 months. This poses some risk to the seller, as a short approval period may simply mean that the clock runs out on one buyer while sending the transaction back to square one when the next buyer comes along. Furthermore, it advised that the purchaser’s obligation to close the sale be predicated on detailed financing specifications. Our discussion of some of the refund or forfeiture of any such report shall be determined the... 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