California Real Estate Broker ExaminationReal Estate PracticeEasy
A buyer is making an offer on a property and wants to ensure they can withdraw from the purchase without penalty if their current home does not sell within 60 days. Which of the following clauses should be included in the purchase agreement?
- AA home inspection contingency.
- BA 'sale of buyer's property' contingency.
- CAn appraisal contingency.
- DA financing contingency.
Show answer & explanationAnswer & explanation
Correct answer: B. A 'sale of buyer's property' contingency.
A 'sale of buyer's property' contingency allows the buyer to terminate the purchase agreement if their existing home does not sell by a specified date, protecting them from being obligated to purchase two homes simultaneously.
Why the other options are wrong
- A. A home inspection contingency allows the buyer to withdraw or renegotiate based on inspection findings.
- C. An appraisal contingency protects the buyer if the property appraises for less than the purchase price.
- D. A financing contingency protects the buyer if they cannot obtain a loan, not if their current home doesn't sell.
Sale of Buyer's Property Contingency
A contractual clause in a purchase agreement that makes the buyer's obligation to purchase contingent upon the sale and closing of their existing property by a specified date.
- Protects buyers from owning two homes simultaneously.
- Often includes a 'kick-out' clause for the seller to accept other offers.
- Specifies a timeframe for the buyer's home sale.
Memory trick: To buy a new home, sometimes you need your old one to sell; that's when a 'sale of buyer's property' contingency steps in.