American Indian Owned Law Firm

Why use a contingency clause in a real estate offer?

On Behalf of | Dec 16, 2022 | Commercial Real Estate Transactions & Leasing

If you’re making an offer on a piece of commercial real estate to start your business, you can include stipulations that you want within that offer. It is not simply about offering money in exchange for the property. You can take further steps to protect yourself and make sure you get the deal that you want.

One way to do this is by using a contingency clause. In order for the offer to be legally binding, the contingencies must be met. This can help you avoid a scenario where you buy a property with issues that you didn’t know existed before you made the offer. It protects your investment and sets your business up for success. 

A property inspection is a common contingency

Perhaps the most obvious example of a contingency clause is one for a property inspection. It is very common for people to make an offer saying that they want an inspection to be carried out and that they will pay a certain amount of money for the property if the building passes that inspection. If it does not pass, then you get your earnest money back and you can walk away from the deal without penalty.

Of course, the seller does not have to agree to the stipulation. In some cases, sellers will know that there could be defects with the property and so they won’t take offers with contingency clauses. In other cases, even if a seller thinks that the property would pass the inspection, they just want to make things simpler and ensure that the buyer cannot walk away from the deal for any reason. In this light, taking these contingencies out may make it more likely that your offer is accepted, but you have to give up some protections.

While weighing what you want to do and working your way through a real estate purchase, make sure you always understand the legal options you have.