CONTINGENCIES
Contingencies are common in real estate contracts. is a common; these are clauses in a contract that give either the buyer or seller a way to get out of the contract if certain conditions or timelines aren’t met. Here are the most common contingencies:
FINANCING
Can the buyer obtain financing? Sometimes the Buyer thinks all is well, but then at the last minute discovers that there is a problem. A contingency allows the Buyer out of the contract if he cannot obtained the financing promised.
HOME INSPECTIONS
Everybody likes to have the home inspected to make sure that it is what it seems. This is probably the most common contingency. A Buyer is allowed to have a Home Inspector point out items that might be difficult to see, but the Buyer is also allowed a pest inspection, water & sewage inspections, radon or mold inspections. The Seller is required to meet certain standards of plumbing, electric, and structural, but might often repair other items to keep the Buyer happy.
APPRAISALS
If uncertain of the pricing, one can elect to have an appraisal of the property to insure its value, but if getting lending, most lenders require the appraisal. If it appraises lower than the asking price, in certain situations this previously agreed price may be negotiable.
SELLING A HOME
Often a Buyer makes an offer on a new home before selling his existing home. The Buyer may feel the need to sell his home before getting additional financing or before the property closes and writes a contract contingent on the sale of his existing home. This entails a time period and to be able to sell within that time period, the deal moves forward. If it fails to sell, the seller can exit the deal. Sellers to not like this contingency and are hesitant to accept this kind of contingency knowing that they can probably find another buyer capable of closing the deal faster. This contingency is more popular during certain market conditions. New home builders may be more willing to accept an offer contingent upon the sale of an existing home.
Take time to think about what contingencies you might like to have added or not. In South Carolina, the contracts now have a choice between an Inspection Contingency or a Due Diligence period. The Due Diligence, also known as the "get out of jail free card" allows the the buyer a certain specified number of business days to examine the property and decide if they really want it or not. This time is often used for an inspection, to read the rules of the community, to look at any legal matters pending, but the bottom line is that the Buyer can vacate the contract for any reason at all during this period. This is a headache for Sellers when a property is returned to the market, but lets the Buyers really decide if they want the property. A stronger offer would be a contingency based on a home inspection because the Seller can always fix the list the Buyer requires and still have a deal. Know if you have competition or not or what the current market dictates in order to make a strong offer if needed.