What is a title contingency?
What is a title contingency in a real estate transaction?
a title contingency allows the buyer to review title for easements, covenants or restrictions that affect the buyers intended use of the property. If seller does not remedy the buyers disapproved title issues then the buyer can terminate the contract and the earnest money is returned to the buyer.
The buyer will have a 5 day default timeline (this can be shortened) from the date of mutual acceptance or from the date of receipt of preliminary title (whichever is selected) to review the preliminary title report and give notice of any dissaprovals of exceptions in the title report. If buyer gives dissapprovals then the seller has a default 5 day timeline to agree to clear them. If seller does not agree to clear them then buyer may terminate the purchase and receive the earnest money back.
The seller has until closing to correct the exceptions.
Sometimes new exceptions will appear throughout the purchase process after the review deadline has passed. If this occurs then the time period and procedures start over for the new exceptions only.
If you are a buyer it is important to include this contingency in your offer so that you can review all recordings on a property, easements, rules of communities, judgements or liens. It helps to identify title restriction that could prevent you from using the property as you intend
If you are a seller: If the buyer includes this contingency, you just want to be sure to keep the timelines short. You just want to be sure your agent gets the preliminary title to the buyers agent in a quick manner so you don’t draw the timing out.
Your agent can order preliminary title in advance of listing your home which will point out any red flags that need to be addressed and this can be provided to the buyer to help eliminate the need for this contingency.
One thing to note : Regardless if this contingency is used or not there has to be a clear marketable title in order to close the transaction
That is all I have on title contingency. Check out my channel Youtube for more videos explaining other types of contingencies. Thanks for watching! I will see you next time!