When it comes to buying or selling a property or a business, having a purchase agreement is crucial. It outlines the terms and conditions of the transaction, including the price, payment options, and contingencies. A contingency is a condition that must be met before the sale can be completed. In most purchase agreements, there are two common contingencies that are included. Let`s take a quizlet and find out what these two items are.

1. Financing contingency

The first common contingency in a purchase agreement is a financing contingency. This contingency states that the sale of the property or business is contingent on the buyer obtaining financing from a lender. The buyer must obtain a loan amount equal to or greater than the purchase price of the property or business. If the buyer cannot secure financing, the sale will not go through, and the deposit made by the buyer will be refunded.

This contingency protects the buyer from being stuck with a property or business they cannot afford and the seller from a potential sale falling through because the buyer cannot obtain financing. It is also important for the buyer to obtain a pre-approval from a lender before making an offer on a property or business to ensure that they are financially capable of completing the transaction.

2. Inspection contingency

The second common contingency in a purchase agreement is an inspection contingency. This contingency states that the sale of the property or business is contingent on the buyer having a professional inspection done on the property or business. The inspection must be satisfactory to the buyer, and any necessary repairs or issues must be addressed before the sale can be completed.

This contingency protects the buyer from purchasing a property or business with underlying issues that could cost them a significant amount of money down the line. It also protects the seller from potential liability if they were not aware of any issues with the property or business.

In conclusion, most purchase agreements are contingent on financing and inspection contingencies. These contingencies protect both the buyer and seller and ensure that the sale can be completed successfully. It is essential to include these contingencies in a purchase agreement, and buyers should obtain a pre-approval from a lender and have a professional inspection done before making an offer on a property or business.