CONTINGENCIES?
Contingencies are steps along the way that take place in most real estate transaction. A cash transaction may not include some of these steps depending on what the buyer desires and what the seller accepts regarding the signed contract. During the contingency period, a buyer may choose to not move forward with the home and will in most cases be able to have their earnest money returned to them.
The three main contingencies in most contracts include the inspection, appraisal and loan contingency but there can be more. For example, a buyer may need to sell their own home first in order to purchase a new home.
Depending on the amount of days agreed upon in the contract (17 days is the default), the buyers will have this time period to do any kind of inspections that he chooses and review various reports about the property. The inspection period could be shorter or longer depending on the circumstances.
A general inspection of the property is usually performed first. A report detailing problems with the roof (for example) may result in a buyer hiring a roof contractor to find out more details and determine what the repairs should include.
When a buyer obtains a loan to purchase a home, an appraisal is ordered by the lender. The appraisal determines the value of the home. If the appraisal is higher than the sales price, the buyer will be very happy. If the appraisal is lower than the sales price, there are different options for both sellers and buyers. A buyer may need to put more down so their loan amount is lower or they may decide to come up with more cash at closing that is the difference between the sales price and the appraised value. The seller may also decide to lower the sales price or a combination of both.
Lastly, there is the loan approval. Once the loan is approved, a buyer will be ready to move forward with the purchase of home.
