Mortgage Contingency

Along with the Inspection Contingency, this is the most important contingencies in the transaction and will be carried forward onto the Purchase and Sale Agreement. This clause is HUGELY important. It is an “out” clause for the Buyer to have their deposit returned if they are unable to secure a commitment from their lender for the mortgage. In order to exercise this clause, the Buyer must first apply for the mortgage by the specified date in this clause. And if there is an issue with obtaining the mortgage commitment, the Buyer must notify the Seller by the contingency date. Typically, if the commitment is not yet available by the date, the date can be extended by mutual agreement. The clause, as written, does not require the Buyer to provide the seller a denial letter from the lender, but the practical application of the clause often includes sharing the denial letter with the seller.

Inspection Contingency

Another crucial clause is the Inspection Contingency. This protection typically does not carry forward into the Purchase and Sale Agreement. The Inspection Contingency is another “out” clause for the Buyer to have their deposit returned if the Buyer discovers defects with the home during the home inspection. A threshold is set forth in the offer as to what cost to repair is the trigger to exercise the clause. Generally speaking, the dollar amount used in this clause is $1000, but we have seen this figure vary widely depending on the negotiations to that point. The lower the figure, the easier it would be for the Buyer to exercise their option to withdraw. The clause must also include a date by which the inspection must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw. It is advisable to conduct the home inspection as soon as possible, in order to allow time to negotiate any results into the P&S.

Home Sale Contingency

This contingency clause protects the Buyer who needs to sell the home they currently own in order to purchase the new home. It is an “out” clause for the Buyer to withdraw from the contract and have their deposit returned if they are unable to complete the sale of their existing property. It is a VERY strong contingency for a Buyer and not something that is generally in the best interest of a Seller.

Radon Contingency

Radon is a cancer-causing radioactive gas. You cannot see, smell or taste radon, but it may be a problem in a home. The Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. The good news is that a Buyer will have an opportunity to test for the presence of radon and can have their deposit returned if the test indicates a high level. Radon Act 51 passed by Congress set the natural outdoor level of radon gas (0.4 pCi/L) as the target radon level for indoor radon levels. The clause must also include a date by which the test must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw. This test can take a week or so before results are available so plan accordingly. An unfavorable test is generally not a deal-killer, as the Seller will often agree to install a radon mitigation system in the home that can quickly reduce the high level to a safe level. The cost to do so seems to be in the $1200 neighborhood.

Pest Inspection Contingency

This contingency is especially important for Buyers financing with a VA loan. A pest inspection is a requirement of a VA loan and the Buyer cannot pay for such as inspection in Massachusetts. It is advisable to determine the bearer of this cost in the offer form or at least between the real estate agents prior to full acceptance of the offer.
The Pest Inspection Contingency is yet another “out” clause for the Buyer to have their deposit returned if the Buyer discovers termite infestation in the property. The clause must also include a date by which the test must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw

Lead Paint Contingency Addendum

This clause affords the Buyer the right to conduct an inspection for lead paint. There is typically no requirement to do so and very few Buyers purchasing a single family residence intended to be used as their primary residence conduct such a test.
According to Mass.gov, under Massachusetts and federal law, owners and real estate agents must comply with Property Transfer Lead Paint Notification requirements when a prospective buyer or tenant with an option to buy is about to purchase a home built before 1978.
The aim of this requirement is to inform prospective buyers about:
The danger lead paint poses to children and adults, lead poisoning prevention steps, and the requirements of the Lead Law
To comply with both state and federal requirements, sellers and real estate agents must provide the Property Transfer Lead Paint Notification to a prospective buyer before signing a purchase and sale agreement. In addition, they must:
1. Provide a copy of any lead inspection report, risk assessment report, Letter of Compliance, or Letter of Interim Control.
2. Tell the buyer anything they know about lead in the home.
3. Tell the buyer that, under the Lead Law, a new owner of a home built before 1978 in which a child under six will live or continue to live must have the home either deleaded or brought into Interim Control within 90 days of taking the title.
4. Sign, and have the buyer sign, the certification page of the Property Transfer Lead Paint Notification, which contains a checklist to ensure that the buyer has been fully notified of the requirements of the Lead Law.

Other contingencies that we will address in the future include :

Flood Insurance Contingency
Sellers Contingencies such as:
Suitable Housing
Kick-Out Clauses
License to Sell or other title clearance matters
Subject to Third Party Approval, aka a Short Sale

About the author: The above Real Estate information on Common Massachusetts Contingency Clauses found in Purchase and Sale Agreements was provided by Timothy Sherman, an active attorney in the real estate law field. Tim can be reached via email at tim@timshermanlaw.com or by phone at 781-664-4936.  Attorney Sherman has helped people close on their homes in many Massachusetts cities and towns for the last 10+ Years.

Thinking of buying, selling  or refinancing your home? I have a passion for Real Estate and love to share my legal expertise!

I handle closings throughout the South Shore and Greater Boston Area such as: Boston, Braintree, Canton, Cohasset, Dartmouth, Dedham, Duxbury, Fairhaven, Hanover, Hingham, Marshfield, Milton, Nantucket, Newton, Norwell, Plymouth, Quincy, Walpole, Wellesley, Westwood, Weymouth and Wrentham.

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