There are all sorts of contingencies that occur in a transaction, but today I’m taking a look at the four most prominent ones.
In real estate, a contingency means that a condition on the agreement of sale needs to be met for the sale to keep moving forward. Though every transaction will require a different approach, the goal is always to create a win-win situation for all parties.
Here are the four most common contingencies that we see:
1. Financing. There’s a whole laundry list of things that the mortgage company will have to do before they’re able to determine whether a buyer can be lent money. This process takes about three weeks, though some lenders can manage it faster under certain circumstances.
2. Inspections. An inspection occurs at the beginning of an agreement and is a chance for the buyer to learn more about the property’s integrity and possibly renegotiate the terms of the deal should something dissatisfactory be found.
3. Appraisal process. The home must appraise for its purchase price for the mortgage company to lend the buyer an amount matching that price. In other words, an appraisal ensures that the supposed value of the home is truly there. It’s not just value they’re looking for though; condition matters greatly too. Sometimes, an appraiser might call for repairs before settlement can occur.
4. Title. A buyer needs a free and clear title—no liens, back taxes, or encumbrances can be present on that property if they want to receive the mortgage company’s OK to settle.
If you need further information on this topic or have questions on any other real estate-related topics, feel free to give me a call or send an email. I always look forward to hearing from you.
During the COVID-19 crisis, there may be additional types of contingencies. If you’d like to discuss these, please give me a call.