When you list your Wasilla home for sale you may learn a whole new vocabulary: real estate agent-ese. Too many of my colleagues throw insider jargon and legal terms around as if their meanings are common knowledge. So, today, we’re going to take one of the most commonly tossed out words and break it down for you. That word is “contingency.”
At its most basic, consider a contingency as an “if” in the contract. It’s as if the homebuyer is saying “Sure, I’ll buy your home, and I’ll pay you X dollars for it IF Y occurs.”
The “Y” can be translated into “if I get my loan,” “if the home inspection is satisfactory to me,” “if my current home sells,” or even “if you leave all your furniture in the home.” In other words, a contingency can be just about anything.
Contingencies typically come with dates attached to them. “I’ll buy your home as long as you repair the roof by April 20.” If you agree to the contingency, the clock starts ticking on all of the various time limits on the various contingencies.
Remember, contingencies are also exit strategies for buyers. If any of them aren’t completed by the date specified, the buyer can legally walk away from the deal without losing her earnest money.
Loan Approval – This is typically the first contingency in any purchase contract. It states, in a nutshell, that the buyer must get final loan approval for the deal to go through.
Home Inspection – Most buyers will want a professional home inspection and a certain amount of time for it to be completed.
Sale of the buyer’s current home – This is something you, the seller, seldom want to see in the contract. Making the sale of your home contingent on the sale of someone else’s is seldom a good idea. In slow markets, however, sellers sometimes take the gamble.
Inspection of the HOA documents – If your home is in a managed community, your buyer will ask for a certain period of time to go over the homeowner association documents.
Appraisal – Unless the buyer is paying cash for the home, there will be an appraisal. This is ordered by the buyer’s lender and its purpose is to ascertain the home’s current value to ensure the lender isn’t loaning more than the home is worth.
As mentioned earlier, there may be any number of other contingencies in your purchase agreement and we’ll go over all of them with you.
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