November 20, 2018
Common Contingencies on the Way to Closing on a Home
A purchase agreement on a home may at times require certain contingencies be made. Contingencies in this context are certain conditions precedent necessary to be met for a buyer to be able to close on the home. This means that a contract can be cancelled, should those conditions fail to be met, without causing any penalties for the buyer or for the seller—beyond time lost and the missing of potential other offers that might have been made had the home not been under purchase agreement.
Contingencies can come in all shapes and sizes, so to speak, but there are a number of types that we tend to see fairly often:
- Sale of Previous Home: The potential buyers may be in the process of attempting to sell a home themselves. The great majority of home-buyers who are moving from another home over which they have ownership intend to use the money earned from the sale of their old home to finance at least the down payment on the new property. This sort of contingency allows for a purchase agreement to be entered into prior to the sale of that previous home, and is almost always accompanied by a time-limitation. In other words, if the buyer’s previous home is not under agreement by a certain date, the agreement they have made with the seller of the home they intend to buy will be cancelled, so that the seller can proceed to accept offers from other potential buyers.
- Home Inspection: This allows for a professional inspection of the home prior to closing. Should the inspector discover a major issue, the potential buyer may back out of the agreement or request that the seller correct the issue before the sale proceeds.
- Financing: Should a potential buyer fail to be approved for the mortgage amount they expected to pull, this provision allows the purchase agreement to be cancelled.
- Appraisal: This sort of contingency allows the potential buyer to have the property professionally appraised, so the price agreed on in the purchase agreement may be compared to the home’s fair market value. Should there be a considerable discrepancy, the potential buyer may cancel the agreement without forfeiting their deposit of earnest money.
Once buyers have discovered just the right property, and the contingencies have cleared, we’ll be ready to aid in the closing. We at Topouzis & Associates, P.C. are experts at ferreting-out problems with title and disposing with them in advance of closing. We take pride in the great amount and quality of experience we bring to the closing table in Rhode Island, Massachusetts, and Florida. Contact us if you want a partner in your property closing—one who makes everyone involved feel like family.