A contingency is a condition that needs to be met before a real estate transaction can continue moving forward. Although buyers can include many different contingencies in a contract, it is equally important for a seller to know and understand contingencies as it impacts the sale for both parties. While there are many buying contingencies, here are some of the most common.
As a buyer of South End real estate, an inspection is incredibly beneficial because it provides a comprehensive overview of the home. While the walls and floor may look clean, and the kitchen and bathrooms are updated, there is no way to know what is beneath the surface without a professional inspection. A home inspection typically examines the interior and exterior of the home and its systems, such as plumbing, electric, foundation, and roofing. An inspection can also account for mold, water damage, and insects, like termites.
Buyers receive a report detailing information about the home and recommendations for repairs. An assessment can find the roof is faulty and cause water damage to the wood beams. The buyer can negotiate with the seller based on the inspection results to fix the issues. Buyers can also leave a contract if they feel the home needs too much work.
Appraisal and financing contingency
Buyers planning to purchase Beacon Hill real estate using a mortgage typically have a financing contingency in the contract. This allows buyers time to apply for a loan and receive funding to buy a home. It is essential to understand that pre-approval is not a solidified loan; it is only the start of applying for programs and going through the underwriting process. Underwriting is a critical step in the loan process because it sets conditions that must be met to issue a loan. If they cannot be met, buyers cannot receive a loan. A financing contingency allows buyers to end a contract if denied a loan.
Typically, a satisfactory appraisal is one of the conditions for obtaining a mortgage. An appraisal determines the market value of the home. The contingency comes into play if a home is appraised for 500,000 but is listed for 550,000. In many cases, the loan will only cover 500,000, and the buyer is left to find additional financing or pull out of the contract.
Home sale contingency
A home sale contingency is very popular among South End
real estate buyers who are also trying to sell their current homes. In some cases, buyers find the perfect home before their existing home has sold. The home sale contingency identifies a specific amount of time a buyer has to sell their home, and if they cannot sell their home, they are entitled to end the contract without being forced to own two homes. This contingency can pose trouble for sellers. Sellers are risking removing their home from the market for a buyer that may not be able to purchase the home and miss out on another buyer. It is common for sellers to bypass offers with a home sale contingency for offers with more assurance.
The settlement contingency goes along with a home sale contingency. If a buyer is in contract with their existing home and has a closing date, it is not yet considered sold until after the closing date. When the buyer's current Beacon Hill
real estate closes by the determined date, the contract on the buyer's future home remains or can be terminated if the sale falls through before the closing date.
Much like a car title, the home title shows South End real estate ownership. The title is a legal document that records previous and current homeowners and any liens against the property. In most cases, a buyer will use a title company or an attorney
to review the title and ensure there are no issues so that it can be seamlessly transferred to the new owner. If a problem with the title cannot be resolved before closing, the title contingency allows buyers to exit the contract. If the buyer chooses to continue with the sale despite the issues, they could face legal challenges like contested ownership and debt payments.
Contingencies for buyers and sellers
If a contingency is not met, the buyer and seller can renegotiate or void the contract. For buyers, multiple contingencies can jeopardize their offer and lead to being passed over for a more concrete offer with less chance of a void agreement. There is a balance where buyers must protect themselves and understand that the seller's goal is to sell their Beacon Hill real estate quickly and profitably. While contingencies protect the buyer, they can also hurt the buyer from moving forward
with a purchase.
Contingencies are also beneficial to a seller and protect them from sales where the buyers cannot pay for the home. It can be riskier for a seller to accept contingencies as there is a higher chance that the contract can be terminated for multiple reasons.
Buying and selling a home can create challenging decisions that impact how long a home sits on the market, the list price, and pending contracts. Contingencies are specified in the sales contract and are legally binding. Buyers and sellers must understand the implications of willingly entering into an agreement, especially with contingencies. It is critical for both parties to consult real estate professionals with expert knowledge in sales, contracts, and contingencies to represent your best interests.
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