- Contingencies are generally set up to either allow a buyer to investigate one or more features of a property or have the seller do something. The buyer usually pays for the costs of research contingencies.Here are some common issues in country real estate that I’ve seen as the subject of contingencies. This list is illustrative, not exhaustive:
Improvements
Residence. House inspection by certified inspector.
Inspection of condition and operation of barns and other out-buildings
Suitability of soil for new construction
Obtain estimates to build or remodel.
Infrastructure
Inspection of existing septic system. (Design and capacity will be on file with local agency that issued the construction permit.)
Percolation test. Contingency allows buyer to test soil for conventional septic-system site. Testing methods differ, but usually require a backhoe and a soil specialist. A conventional system is about 1/4th the cost of a “constructed” septic system.
Quality and quantity of household water. Quality is determined by taking a water sample and having it thoroughly tested for both organic and inorganic substances, not just bacteria.
Cost of installing new utilities to house or house site.
Boundary survey or having a surveyor perform some specific task that’s of concern. One common contingency is to have a surveyor confirm acreage and boundaries using a deed-mapper program. I recommend against buyers splitting the cost of a survey with sellers.
Clearing up a physical or legal access road issue.
Having the seller resolve a boundary encroachment with neighbor.
Condition of road or bridge
Environmental and natural resources
Test agricultural soils for productivity and qualities.
Examine fields and forests for condition, pests, blights, infestations, etc.
Have a consulting forester perform a walk-through or cruise to inventory the seller’s timber and determine its quality and condition.
Perform tests to determine extent of wind resources or subsurface minerals, such as oil, gas, coal or non-energy minerals
Test water for quality, quantity and reliability for agricultural applications
Look into risks from natural hazards, such as earthquake, flood, coastal flooding, tornados, hurricanes, landslides, lightning, fire, drought, etc.
Regulatory issues that would limit buyer’s use of the property, such as the presence of wetlands, endangered species or archeological resources
Tests for air, water or land pollutants
Wildlife/game inventory
Zoning and other administrative/legal actions.
Sale contingent on property being rezoned to allow division, different use or new agricultural activity. Seller gets rezoning; buyer pays costs.
Sale contingent on state highway department issuing new-entrance permit
Contingent on seller warranting that the property is free of unrecorded encumbrances and claims of adversity, along with a promise to defend the buyer against such claims and make the buyer whole if necessary
Contingent on getting Homeowner Association approval for something
Contingent on getting preliminary approval for a conservation easement, organic certification or land-use designation (which reduces property tax)
Contingent on getting acceptable answers from owners of minerals regarding their development plans
Contingent on obtaining an easement to cross a neighbor’s property, often used for access roads and utilities
Financial
Examination of farm tax returns, annual production records, timber records or mineral royalties
Preliminary approval or green light for participation in some federal program such as conservation cost-share or crop subsidy
Financing for purchase of property and operating capital
Purchase of some other property/asset the buyer needs to go with seller’s Property
While these arent' all of the potential contingencies it's a good place to start. To best protect yourself make sure your real estate agent is familiar with and has sold lots of country property. They can guilde you through the process and help you find the resources to make this a productive effort. For more information give us a call at the Rural KC Team, 913-837-4665, or email us at info@RuralKC.com
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