Contingencies Offer Important Protections to Parties to Real Estate Transactions in Massachusetts
When buying or selling property in Massachusetts, contingencies in the real estate contract play a critical role in protecting both parties. These provisions create safeguards that allow buyers or sellers to walk away from the deal under certain conditions without penalty. In this article, we’ll explore the most common contingencies found in Massachusetts real estate contracts and how they work.
What Are Contingencies?
Contingencies are conditions that must be met for the real estate transaction to proceed. If a contingency is not satisfied, the party it protects can back out of the contract without losing their deposit or facing legal consequences. Both buyers and sellers should understand the contingencies in their agreement to avoid unexpected surprises during the transaction.
Common Contingencies in Massachusetts Real Estate
-
- Mortgage Contingency
The mortgage contingency is one of the most important for buyers. It allows the buyer to back out of the deal if they are unable to secure financing within a specified timeframe. If the buyer cannot obtain a mortgage by the deadline, they can terminate the contract without penalty, and their deposit is refunded.
- Appraisal Contingency
This contingency ensures the property’s appraised value matches the agreed-upon purchase price. If the appraisal comes in lower than expected, the buyer can renegotiate the price or withdraw from the deal.
- Title Contingency
The title contingency protects the buyer by allowing them to cancel the contract if a title search reveals defects, such as liens or ownership disputes. A clean title is essential for the buyer to take full ownership of the property.
- Sale of Buyer’s Property Contingency
This contingency gives the buyer the right to terminate the contract if they are unable to sell their current home within a specified period. It provides protection for buyers who are purchasing a new home while trying to sell their existing one.
- Septic System (Title V) Contingency
In Massachusetts, properties with septic systems must comply with Title V regulations. This provision ensures the seller provides proof that the system meets state standards. If the system fails, the buyer can require the seller to make necessary repairs before closing.
- Inspection Contingency
The inspection provision allows the buyer to conduct a full inspection of the property before the sale is finalized. If serious issues are discovered, the buyer may have the opportunity to negotiate repairs, request credits from the seller, or terminate the contract.
Why Contingencies Matter
Both buyers and sellers must understand the contingencies and provisions included in their real estate contracts. These safeguards provide crucial protection and can prevent significant financial loss or legal disputes. Having a real estate attorney review the contract ensures that the terms are fair and that both parties are adequately protected.
Conclusion
Contingencies in a Massachusetts real estate contract provide essential safeguards for both buyers and sellers. Provisions like the mortgage contingency, appraisal contingency, and Title V compliance help ensure that the deal proceeds smoothly or allows for an exit under certain conditions. Always consult a real estate attorney to ensure that your interests are protected throughout the transaction.
