Contingencies and Amendments

Question 1

What is a contingency clause?

Answer 1

Conditions attached to an offer to purchase property and is included in the real estate contract which must be met in order to make the purchase offer binding.

Question 2

When does a contingency become part of a binding sales contract?

Answer 2

When both parties agree to the terms and sign the contract.

Question 3

What are the two ways to write a “sell” contingency?

Answer 3

A settlement contingency and a sale and settlement contingency

Question 4

What is a “kick-out” clause?

Answer 4

A sale and settlement contingency with the right to continue marketing a property after a contract has been accepted but not satisfied.

Question 5

What type of contingency clause might an insurance agent want if he or she wants to buy a home and be able to conduct business from his basement office?

Answer 5

Home Business Contingency

Question 6

What is a Home Owner Association Documents Contingency?

Answer 6

A sales contract clause making the sale contingent upon the buyer’s receipt and approval of all HOA documents, rules and fees.

Question 7

Which person is best suited to resolve a property title issue?

Answer 7

A Title Agent

Question 8

List at least two general guidelines to following when working with contingencies?

Answer 8

The fewer contingencies the more attractive the offer will be to the seller.
If possible, limit the offer to a single contingency.
Only carry out a contingency if absolutely necessary.
Contingencies can be negotiated after the fact.

Question 9

Define a contract amendment?

Answer 9

An amendment makes changes in an already existing agreement

Question 10

Define a contract addendum?

Answer 10

An addendum means including an additional document in the already existing one

Question 11

Which TREC form was designed to document a contract amendment?

Answer 11

TREC # 39-8 is a promulgated Texas amendment form that is a one page, easy to use document

Question 12

Identify two actions can modify the terms of a real estate contract?

Answer 12

Amendment and Addendum

Question 13

A contingency must be met in order

Answer 13

for a real estate contract to become binding. A contingency becomes part of a binding sales contract when both parties agree to the terms and sign the contract.

Question 14

An appraisal contingency protects the buyer by

Answer 14

ensuring that the property is valued at a price that is close to what is being offered by the buyer.

Question 15

It is important for all parties to understand the details included in a contingency clause

Answer 15

Many a sales contract has drifted into hazardous water because a contingency was not fully recognized and followed.

Question 16

Most contingencies have specific release dates

Answer 16

which means on or before a date, the buyer must notify the seller of completion. If a date is missed without notice, the seller can assume that a contingency has been satisfied and the buyer will not be able to back out of the transaction.

Question 17

A House Sale Contingency

Answer 17

gives a buyer a specified amount of time to sell their existing homes in order to finance the new one.

Question 18

A settlement contingency can be put in place when

Answer 18

a buyer has already accepted an offer on their current home, but has not closed. This clause can protect buyers from losing any down payments if their own closing process falls through.

Question 19

A pre-sale home inspection is almost always

Answer 19

a given in home sales today. In some cases, poor inspection results can actually break a transaction. A home inspection ensures that the buyer knows exactly what they’re getting.

Question 20

A financing contingency gives the buyer

Answer 20

time to apply for and obtain financing for the purchase of the property. This provides important protection for the buyer, who can back out of the contract in the event he or she is unable to secure financing.

Question 21

Oftentimes, the issues in a title report

Answer 21

will not actual halt the sale outright, but may give the buyers a reason to reconsider the purchase. For instance, a road easement on the property may give neighbors access rights across the property. This easement maybe unacceptable to the new buyer. In this case, the buyer would be able to back out of the deal.

Question 22

An amendment

Answer 22

is more commonly used than an addendum.

Question 23

Amendment

Answer 23

means making changes in an already existing agreement

Question 24

Addendum

Answer 24

means including an additional document in the already existing one

Question 25

An amendment might be used to

Answer 25

correcting or improving the document. An amendment could also be used to supplement information to the first document.