It’s seems there are many news articles that talk about the fact it’s a “seller’s market.” This means if you are selling your home, you’ve probably gotten a few offers from which to choose. While sales price is important, so are the contingencies attached to the offer. Understanding what these contingencies mean can help you choose the best offer from the pack.
5 Most Common Contingencies
- Home Inspection Contingency–This allows the buyer the right of a professional inspection to determine the condition of the home. Generally, this must be performed within seven to ten days. Afterwards, the buyers negotiate repairs through their representatives with the sellers and their representatives. The inspection typically will address everything from a loose doorknob to possible further inspections if there are more issues like structural or fugal along with any safety, fire, and system condition issues.
- Appraisal Contingency–A professional appraisal will be ordered to ensure the price offered in the offer is fair market value. If the purchase will be financed, the lender must ensure the home is worth the loan value.
- Final Loan Approval Contingency–This contingency protects the buyer in the event they are unable to obtain final loan approval. However, the buyer is not allowed to put themselves in a position to no longer afford the property like financing a car, or charging items to a credit card. The Purchase-Sale-Agreement strictly states this. Doing so could lead to a possible lawsuit. Make sure your realtor discusses this with you.
- Sales of Current Home Contingency – Sometimes a buyer will make an offer on a new home before their current one has sold. This contingency protects the buyer from having to complete the new sale until their home has sold as they may not qualify financially without the sale of their home.
- Title Contingency–This contingency protects the buyer if the seller does not have the “right” to sell the home due to unforeseen ownership issues. This is a very complex area. A title company needs to be used to make sure proper title insurance is issued and there aren’t any other title issues like liens, easements, and proper ownership. This is where usually most For-Sale-by Owners (FSBO’s) get into “sticky water” and legally can be a long a drawn out process.
Contingencies are part of most real estate contracts. As you review buyers’ offers, make sure to consider both the kind of contingencies and how long before the buyer must remove them. This way, you will choose the offer with the best terms and price.