WATCH OUT FOR CONTINGENCIES WHEN
SELLING OR BUYING A HOME
By y Larry Stoller | Aug 2, 2022
Most real estate contracts have
contingencies that will allow the buyer (or sometimes the seller) to terminate
the agreement if the house appraisal falls short of the purchase price or if
the home requires repairs that cannot be agreed upon.
These contingencies are
conditions that must be met to close the real estate deal. Contingencies can be
negotiated. In many cases, the price can be adjusted and the repairs can be
agreed upon. But if sellers and buyers cannot reach agreement, the
contract might become null and void.
The most common types of
contingencies include:
• Property sales contingency –
where the purchaser must sell his or her current home before closing the
transaction on the home they are buying.
• Mortgage contingency – which
allows the buyer a refund of the earnest money deposit if the lender does not
commit to the mortgage (this can happen if the buyer is not fully approved).
• Inspection contingency –
which allows the buyer to inspect the property to ensure that there are no
major defects, items that require repair, or systems that need to be certified
in good working condition.
Inspection contingencies are
sometimes more difficult to negotiate, as they can be both objective and
subjective. For example, if the air-conditioning system is 10 years old but
still working fine, the buyer might want the system to be inspected by a
licensed HVAC specialist. Based upon that inspection, the buyer
might request that repairs be made or that a new system be installed.
Other types of contingencies
for the buyer include:
• Approval of property lines
and lot size according to a survey
• Property appraisal comes in
less than the contract price
• Review and acceptance of
restrictive covenants or deed restrictions
• Review of any leases between
the current owner and tenants
• Buyer has to sell another
property to complete the purchase
• Verification that there are
no environmental or mold problems
If a buyer has too many
contingencies, the seller may demand an escape clause, allowing them to
continue marketing the property and accept another offer.
In today’s hot market, the
seller might request a flexible closing date or a leaseback agreement that
would give them sufficient time to find a place to buy or rent.
Larry Stoller is a broker and
Realtor with Real Estate Five of the Lowcountry. Larry@RealEstateFive.com,
RealEstateFive.com.