Are you buying or selling a home in Western New York? Read these Buffalo real estate tips and contact us to schedule a consultation.
The Closing Contingency Clause
A closing contingency is slightly different from a sale contingency in that you already have a contract to sell your home.
Rather than obtaining an agreement to sell your home, your contract to purchase a new home is contingent on completion of that sale because the proceeds from that sale enable you to complete your purchase.
The Sale Contingency Clause in a Real Estate Contract
One complex issue that can arise in a real estate transaction involves a purchaser who, in order to complete their purchase, must sell the home in which they presently reside because they need the money from the sale of their current home in order to complete the purchase of the new one.
When a sale contingency is required, a specific rider is executed setting a specific number of days within which the buyer must enter a bona fide sale contract for the home they’re selling in order to keep the purchase contract alive. This is called a sale contingency clause.
A bona fide contract requires the buyer to, not only enter a contract for sale of their home, but also to overcome the attorney approval and home inspection contingencies. If both of those items are accomplished within the requisite time, the sale and purchase will proceed – presumably with simultaneous closings. As the buyer, you will complete your sale first, and then immediately take the money from that sale to the closing of your purchase to complete that transaction.
The Attorney Approval Process of a Real Estate Transaction
One can enter into a contract before attorneys ever see it. The Erie County Bar Association contract, which is widely used in Western New York, allows attorneys three business days to review and approve a contract after they receive it.
The essential point is that, within the allotted time, an attorney can either approve the contract, conditionally approve the contract (if there is a need for clarification or an item that was left blank by mistake), or disapprove the contract.
If the attorney disapproves the contract, the transaction is over, but if the attorney approves the contract conditionally, the parties can meet and work through the conditions until they are resolved and the contract has an unconditional approval.