How To Not Let Real Estate Contingencies Ruin Your Transaction
It isn't uncommon for home purchase contracts to have contingencies included in them. For instance, you might ask for the right to back out of the deal if you can't get a mortgage or if an inspection uncovers serious problems with the home. It may also be possible to cancel a purchase contract if an appraiser determines that the property is worth less than its list price. Let's take a closer look at these common real estate contingencies and how you can prevent them from scuttling a transaction.
What to Know About the Mortgage Contingency
As a general rule, a buyer has 17 days after a purchase offer is accepted to obtain a mortgage. If you are buying a property, you can protect yourself by getting tentative loan approval before submitting the offer. If you are the seller, you can protect yourself by requiring that anyone who submits an offer includes proof of such approval with their proposal. It's important to note that the deadline to obtain a mortgage can be extended if all parties to the transaction agree to do so.
What to Know About the Inspection Contingency
It is never a good idea to skip the inspection when buying a home. This is because it can reveal the presence of water damage, a pest infestation, or other problems that you didn't notice when you first looked at the house. Furthermore, you can learn critical details about the home such as the age of heating or cooling components or if any of the home's major components are under warranty.
A seller may be able to protect him or herself against this contingency by insisting that the inspection not be used as an excuse to cancel the transaction. In such a scenario, the buyer would still have the right to conduct a thorough inspection. However, he or she would not have the right to back out of the deal regardless of what was uncovered. It may also be possible for the seller to allow the buyer to back out of the deal without recouping his or her earnest deposit.
What to Know About the Appraisal Contingency
If you intend to finance the purchase of a home with an FHA, VA, or USDA loan, your lender will likely want to conduct an appraisal. This helps to ensure that the loan proceeds are being used for a legitimate purpose. Generally speaking, buyers have no say in whether or not a lender will conduct such an appraisal. However, you can protect yourself by having a home appraised before making an offer. Sellers can protect themselves from such a contingency by only accepting offers from buyers who plan to obtain traditional loans.
If you have any questions about real estate contingencies, it may be a good idea to speak with your agent. A legal professional may also be able to provide more insight into your rights and responsibilities when buying or selling a home.