CONTINGENCY CLAUSES: An Advice and Discussion Post...

[Stephen G.]

Hello Everyone,

Thank you for taking the time to read this post. 

I'm currently in the market for purchasing another investment property (multifamily) and am looking for good contingency clauses to insert into the sales contract when the time comes to pull the trigger. 

Any suggestions of ones that you've personally used? 

Of course there's always the standard Home Inspection Clause, however, I would love to add additional clauses regarding the tenants, management, etc. since there are so many angles to consider during the acquisition phase. Especially since many deals can look great at first until you start poking around...   

So what additional clauses have worked for you? Which ones didn't? 

And have you ever encountered any issues due a poorly drafted sales contract, a misleading Property Condition Disclosure, or from the tenants included with the purchase?

How did you handle these situations?

I look forward to your responses below!

[Jesse T.]

I think the Home Inspection clause is very important.  I would avoid other contingencies where possible.  

Generally it will be worth more to a seller to avoid hassles than to fulfill contingencies.  Also contracts with more contingencies are more likely to not result in a sale.

I did want to add a contingency for renting out my previous home, when I bought my current one.  My Real Estate agent talked me out of adding that contingency.  I think it was a good move.  However to get to the top of my price range, I probably would have needed the contingency.  But I think both sides were better off doing the sale at a lower price when they wanted to close.