Most real estate offers have contingencies, which are provisions that must be met for the transaction to go through. If the contingencies aren’t met, the buyer is entitled to walk away from the deal with their earnest money. The fewer contingencies there are, the more likely a contract will go through in a timely manner. Earnest Money
Here are five of the most common contingencies:
Home inspection contingency. This contingency allows the buyer to have the home professionally inspected. If problems are found the buyer can request repairs by a certain date; generally, within five to seven days of the purchase agreement being signed. Depending on where you live, there may be requirements for repairs on structural defects, building code violations, and/or safety issues. But keep in mind that many repairs are negotiable, so there is wiggle room for the sellers to decide what repairs they are willing to make for the sale to go through.
Appraisal contingency. A home must pass appraisal for a buyer to obtain a home loan. The appraisal is a process during which the property’s value is assessed by a neutral third party. The purpose of the appraisal is to be sure that the home’s worth is enough to cover the price of the mortgage. Usually, the home buyer pays for the appraisal, which typically takes place within 14 days of the sales contract being signed.
Financing contingency. A financing contingency is also referred to as a loan contingency or mortgage contingency. It protects the buyer in the event their lender doesn’t approve their mortgage. Although the timeframe for financing contingencies can vary, mortgage lenders report that buyers generally have about 21 days to obtain mortgage approval.
Sale of current home contingency. Sometimes home buyers will make the purchase of the new home contingent upon the sale of their current home. Usually, buyers have a window of 30 to 90 days to sell their house before the sales agreement is voided. This contingency puts the seller at a disadvantage because the buyer’s house might not sell in time.
Title contingency. A buyer must “clear title” prior to having a mortgage approved. This is a process in which the buyer’s title company reviews any potential easements or agreements that are on public record. This ensures the buyer is becoming the rightful owner of the property and the lender is protected from ownership claims over liens, fraudulent claims from previous owners, clerical problems in courthouse documents, or forged signatures. What is a Property Title Search?
These contingencies are common in most real estate sales contracts. However, the sale of current home contingency is used more often in a strong buyer’s market. Just remember that contingencies are negotiable!
If you’re thinking about buying or selling a home in the New River Valley area, contact professional, experienced Realtor Desi Sowers and let her assist you with all your real estate needs. Give her a call today at 540-320-1328!