Is it wise to remove an offer’s contingency clauses?

On Behalf of | Nov 23, 2023 | Business Law

When purchasing real estate, it is common for people to use contingency clauses. These clauses give them a form of protection in case things fall through. 

For instance, the offer to purchase the property may have an inspection contingency clause. If the property fails the inspection, then the buyer doesn’t have to stand behind their offer. They can walk away without an issue. 

Another example is that an offer may have a contingency clause stating that the buyer has to get final approval for the loan that they need to purchase that property. Many buyers get preapproval, make an offer, and then still have to wait for final approval. The contingency clause means that they’re not obligated to pay if they don’t get that loan.

Why would someone remove these clauses?

You can see how beneficial a contingency clause may be, but some buyers will remove them. This can often be beneficial because it makes it more likely that that offer will be chosen.

Consider a seller who gets two identical offers that are right at the asking price. Either one of them would give the seller what they’re looking for. But one offer has numerous contingency clauses, and the other does not have any. Not wanting the deal to fall through for any reason, the seller will choose the offer without the clause.

Does this mean it’s wise to remove contingency clauses? It can be a risk. But there are also benefits to that risk. Every situation needs to be weighed carefully, and both buyers and sellers need to understand their legal obligations.


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