COMMON CONDITIONS AND CONTINGENCIES
IN AN EARNEST MONEY AGREEMENT
An Earnest Money Agreement is the contract for the purchase and sale of a parcel of real estate. It is both a contract and an outline of the steps that will be taken to complete the transaction. As part of a typical Earnest Money Agreement, conditions and contingencies are set forth in the Earnest Money Agreement to allow either termination or modification of the deal in the event that any of the conditions or contingencies occur or do not occur as the case may be.
The following is a list of common conditions and contingencies which may or may not apply depending on the type of transaction. Some of these are typical only in a commercial transaction whereas others are common in either a residential or commercial transaction.
1. Contingent upon Buyer obtaining financing
2. Contingent upon Buyer and the property being approved for financing
3. Contingent upon inspection of the property which results approved by Buyer for the following items:
a. Pest and Dry Rot
d. Electrical System
e. HVAC (heating, ventilation, air conditioning)
f. Septic System (if on septic)
g. Well, Water Quality and Flow Rate (if on a well)
I. Whole Home Inspection
j. Chimney and Fireplace Inspection\
k. Permit Verification
l. Zoning Verification
m. Contingent upon approval of any governing body for any land use or zoning change or decision
n. Contingent upon the sale of Buyer’s other real property
o. Contingent upon approval of any Subdivision or Land Partition requirement
p. Conditioned upon health of Buyer
q. Conditioned upon review of Preliminary Title Report
r. Conditioned upon review of easements, liens, mortgages, trust deeds or other encumbrances
s. Conditioned upon review an approval by engineer, architect, accounting, attorney or other professional advisor
The above list is not a complete list and is simply for illustration purposes. It is important that both the Buyer and the Seller think through what conditions they need based upon their own unique circumstances and discuss the wording of the conditions with their real estate agent, attorney, or other professional advisor that is assisting them. This is where input from the parties are vitally important to give to the professional advisor as the professional advisor does not necessarily know the unique circumstances of the Buyer or the Seller. Try to use plain English and when in doubt it is better to include a condition or contingency rather than not have it included. You can always cancel or waive a condition but if it is not in the contract and you needed it to be in the contract, you may not be able to terminate or modify the contract if the......dictation ended.