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Watch Out for Innocent-Sounding Clauses

Posted October 15th, 2008 under pitfalls, smart selling.

There are many terms and conditions which seem innocent on paper, but can put you at financial risk if they are not interpreted correctly. For example: imagine you are selling your home and buying another. You receive an offer that contains a "condition subsequent" for financing, which means the buyer must inform you within a specific time period if they are unable to arrange financing, otherwise the deal is firm. Come closing time, you have not heard, and so you assume that everything is okay. However, your buyer may have simply failed to inform you! You could be left without the money you need to complete your own purchase.

By contrast, a "condition precedent" for financing means a buyer must inform you once they HAVE arranged financing. In this case, if the deadline passed and you had not heard, you would know that the offer had fallen through and could look for a new offer. The difference in wording is subtle, but the difference in outcome is like night and day! This is one of the main benefits of hiring a Realtor - not only can they explain the meaning of terms and conditions, they also have the experience to protect you from an offer that could put you at serious risk.

Got a question about a contract detail or real estate term? Just ask me, I'll be happy to help.

--Peter

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