Signing a real estate contract may give you a sense of security about the transaction ahead of you. If you have looked long and hard for the perfect property and are eager to get to closing day, you may be relieved to have signatures on a contract in which you and the other party have come to an agreement about regarding the terms of the exchange.
Unfortunately, even a contract may not be unbreakable. In fact, in addition to errors, vague wording and outright breaches, the contract itself may have language that provides a valid out for either party. Skimming a contract before signing it is never a good idea. It is better to take your time and read each term carefully, paying special attention to the fine print where some contingencies may be hiding.
Contingencies or breach of contract?
A contingency allows either side to void the sale if one does not meet certain provisions. In Florida, some contracts for real estate have contingencies that are standard, but it is never safe to assume the inclusion of those contingencies in your contract. For example, contracts typically have a grace period of one or two weeks, during which either party may change their minds. You can also include specific contingencies to protect yourself. The following contingencies also may void the contract:
- There are clouds on the title, such as liens or others besides the seller who may claim ownership of the property.
- Your financing for buying the property falls through, you can’t get a loan for the interest you specified in the contract or your lender goes bankrupt.
- You discover the sellers have failed to disclose material defects about which they knew, such as previous flood or fire damage.
- The property inspection reveals costly flaws; for example, issues with the foundation or termite activity.
Of course, you may be able to make a case to void a real estate contract if you discover something neither you nor the seller knew about. For example, the state may plan to build a freeway near the property, or county zoning changes may be in the works to allow a factory across the street.
However, if the other party breaches the contract without a fair contingency or fails to disclose significant defects on the property, this may leave you with a home that is dangerous, expensive to repair or even uninhabitable. While it may be disappointing to void a contract before completing the transaction, it can be devastating to complete the sale and only then discover the other party’s violation of your rights.