Real Estate Contingencies
for Landlords

As part of the normal process of buying investment property, there are usually certain real estate contingencies that have to be satisfied in order for the sale to be executed. Contingencies are certain conditions that must be completed (satisfied) in order for a contract to be performed. If a real estate sale fails to go through (close), it's usually because one of the parties was unable to satisfy one or more of their contingency requirements.

The purpose of putting contingencies into a real estate purchase contract is to protect both the buyer and the seller.

When purchasing investment property, typical buyer contingencies include the following:

• Inspection Contingency - Purchase of the rental property is contingent upon a satisfactory inspection of the real property that reveals no significant defects. Contingencies could also be made based on the satisfactory repair of a defective item associated with the property.

• Mortgage contingency - The purchase of the real estate is contingent upon or subject to the buyer getting a mortgage to purchase the property. This contingency normally requires the buyer to apply for a loan within a certain time period after the contract is signed. This is the most common contingency for real estate purchase contracts.

• Appraisal contingency - Purchase of the real estate is contingent upon the contract price being at or below a fair market value as determined by an appraisal. Lenders will often not lend more than a certain percentage (fraction) of the appraised value, so such a contingency may be very useful for a buyer.

• Estopple Letters - The buyer or buyer's attorney should send out "estopple letters" to existing tenants occupying the property. These letters will verify the rents being paid and the terms of any rental agreements or leases.

The main contingencies for the seller are:

• Transfer a clear title to the buyer that is free of all liens, and

• Repair any property defects as agreed to with the buyer.

For more in-depth information on real estate contingencies, please visit The Landlord's Library book collection. It contains great information on the complete subject of residential landlording.

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Buying Investment Property