Contingencies are certain conditions in the purchase agreement that need to be met to have a fully binding purchase agreement. Most buyers will have a purchase agreement that is subject to contingencies. The most common contingencies include inspections and financing.

These contingencies spell out what conditions have to be met to continue forward.

Inspection Contingency

An inspection contingency typically gives the buyer 5-10 days to perform any or all inspections on the property. Once they have inspected the property they can move forward, or ask for things to be addressed if things are not working properly. The point of the inspection is to catch the items that would cost the new owner an extraordinary amount of money. These high priced items include a defective sewer line, roof, furnace, air conditioning, structural, plumbing, electrical, and chimney issues, etc.

Little things should not matter as much such as missing smoke detector, a broken outlet, a dripping tub faucet, loose tile, or a noisy dishwasher.

Anything the buyer asks for can be negotiated. And once there is an agreement, the inspection contingency is usually removed.

Financing Contingency

The financing contingency is one that usually lasts until closing. It gives the buyer time to apply for and be approved for financing. After the inspection is removed, buyers apply for the mortgage with terms outlined on the contingency form. If the buyer can't get approved for the mortgage, usually the earnest money is returned back to the buyer.

There is a provision on this document for a "written statement" to be prepared by the lender by a certain date. This is to give some assurances that the buyer is qualified for a mortgage by that specified date and that all the pieces for the mortgage are in place.

Common Interest Community Contingency

If the property is part of an association, Minnesota state law gives the buyers a 10 day period to review pertinent documents, namely: the Declaration, Articles Of Incorporation, Bylaws, Rules And Regulations, amendments or supplemental declarations, and a Resale Disclosure Certificate. The 10 calendar days start after the receipt of all the documents. This is to give the buyer time to make sure the association fits their expectations. They can back out within the 10 days at any time and without specifying a reason.

Sale Of Buyer's Property Contingency

If the buyer needs to sell their house to purchase your house, they may use this contingency. This gives the buyer a chance to sell their house, while still purchasing your house. You as the seller can demand the buyer to remove this contingency and they will have a specified number of days to remove the contingency. They can do so by either having their house sold, change their purchase to not be contingent on their sale, or they can cancel their purchase.