Contingency Clauses in THE Ohio Home Purchase Agreement (or Contract) Form

What is a Standard Home Purchase Agreement (or Contract) Form?

I don’t think there is any such thing as a Standard Home Purchase Agreement (or Contract) Form.  When a home buyer in the Cleveland, Ohio area (a similar practice might be prevalent in other areas) is ready to make a purchase offer to a home seller, a real estate agent, may present to the home buyer, a Home Purchase Agreement (or Contract) Form, which the agent may refer to as the “Standard”   I call it the Standard Home Purchase Contract for Sheeple.  This contract form may be a rudimentary real estate document authored by a local real estate body or group.  It does not mean that the home buyer (or the home seller) is legally required to use this so called Standard Home Purchase Agreement (or Contract) Form.  Make no mistake when it comes to this form; this document is arguably the most important document in the arduous home purchase process.  I have two words regarding this Standard Home Purchase Agreement, BUYER BEWARE.  In my opinion, this standard contract strongly favors the home seller; it shields everyone but the home buyer.  Hire a real estate attorney, don’t be penny wise and pound foolish when it comes to a home purchase.  

Other Names for a Contingency Clause

• Jump Out clause
• Escape clause
• Outs clause
• Weasel clause
• Exit plan
• Exit strategy
• Strategic withdrawal
• Plan B

A Weak Contingency Clause in one Standard Home Purchase Agreement (or Contract)

Here’s the text of  a weak Mortgage Contingency Clause from one Standard Home Purchase Agreement Form:

Buyer shall make a written application for the above mortgage loan within _____ days after acceptance and shall obtain a commitment for that loan on or about ______.  If, despite buyer’s good faith efforts, that commitment has not been obtained, then this agreement shall be null and void.

Here are some potential questions to ask your real estate attorney about such a weak Mortgage Contingency Clause:

• What is the definition of good faith efforts?  Should there be a definition of good faith efforts in the home purchase contract form?  Consider asking your real estate attorney to insert a definition of good faith efforts in the contract form.
• If the lender offers a 30 year home loan at an unreasonably high rate of interest (say 10% or 20% or 30%), is the home buyer obligated to sign up for the mortgage?
• What kind of commitment for the loan?  Verbal or written?
• Whether the agreement is related to the the lender’s home appraisal of the home?  Whether other lender conditions have to satisfied?

A Better Mortgage Contingency Clause in a Home Purchase Agreement (or Contract) Form

I think, in a Home Purchase Agreement Form, common sense calls for the inclusion of:

• Type of loan (ARM, Conventional…)
• Acceptable rate of interest (percentage)
• Type of rate of interest (fixed, adjustable)
• Definition of good faith efforts
• Name of the lender?

Other Potential Contingency Clauses in a Home Purchase Agreement (or Contract) Form

• Home inspection contingency
  • Flood plain
  • Earthquake
  • Lead
  • Pet
  • Asbestos
  • Radon
  • Termite
  • Urea Formaldehyde Insulation
• Attorney approval contingency
• Approval of an independent appraiser contingency
• Access to the home prior to closing contingency
• Title contingency
  • Loan Policy
  • Owner’s Policy of Title Insurance
• Compliance with building codes contingency
• Sale of buyer’s existing home
• Deed contingency
• Contingency regarding sudden job loss or divorce or death
• Contingency regarding survey certificate
  • Boundary Improvement Survey (Stake Survey)
  • Surveyors Real Property Report (Spot Survey)
• Contingency for all systems (heating, plumbing etc.) for 30 days after settlement

Reference:  Home Purchase Contracts, prepared by Glenda M. Herman, Extension Housing Specialist, North Carolina State University Cooperative Extension