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Can real estate contingencies lead to disputes?

On Behalf of | Jun 24, 2024 | Property Law

Contingencies in real estate contracts are meant to protect buyers and sellers during property transactions. They allow for backing out if certain conditions aren’t met. However, these contingencies can sometimes lead to disputes, resulting in complications in the deal. Foreseeing potential disputes in contingencies may help you prevent them and ensure a smoother transaction.

Financial contingency

This clause is crucial for buyers who rely on mortgages. Disagreements often arise if sellers believe buyers did not make a good faith effort to obtain financing. Buyers might also take too long to notify sellers of financing issues, leading to accusations of bad faith or breach of contract.

Appraisal contingency

An appraisal contingency allows buyers to back out or renegotiate if the property appraises for less than the purchase price. The buyer may want to renegotiate, while the seller may insist on the original price. Texas law offers some mediation options, but reaching an agreement may be challenging.

Inspection contingency

Problems unearthed during a home inspection can lead to misunderstandings. Inspection contingencies permit buyers to inspect the property and renegotiate or withdraw based on the findings. Disputes can occur over interpreting what constitutes a “serious defect” for each party. Sellers may feel that buyers unfairly use minor issues to renegotiate the price. Buyers may balk at the cost of repairs.

Sale of current home contingency

Buyers sometimes need to sell their current homes before purchasing a new one. If this process takes longer than expected, sellers might become frustrated. This may lead to disputes over extensions or the contract’s validity.

Preventing and resolving disputes

Both parties should clearly define all contingencies to minimize the potential for disputes. Engaging with a legal team might help draft a watertight contract and set realistic timelines. Additionally, maintaining open and honest communication is crucial throughout the process.

Resolution methods such as mediation or arbitration may be used when disputes arise. Buyers and sellers may effectively find solutions through these processes without resorting to litigation. Texas courts generally encourage these methods to resolve real estate disputes amicably and fairly. If the parties fail to reach an agreement, consider seeking experienced legal guidance that may represent and uphold your rights in court.