When you’ve found a home and you’re under contract, it’s an exciting time! But it can also be stressful. Let’s talk about the contingencies that allow for you to cancel the Buy-Sell contract if something goes wrong.
Every contingency is outlined on the Buy-Sell. Remember, this is the contract that outlines the agreement between buyer and seller and is basically the end-all be-all of the transaction.
On the Buy-Sell we use, the first contingency is the Inspection Contingency. When you go under contract the first thing that needs to be scheduled is the inspection,unless you elect to release this contingency and not get one. One should absolutely consult their Realtor about this, as every situation is different.During the inspection, a professional will go through the house from top to bottom and write a report of everything seen. If anything is in disrepair, or if something is discovered that may be harmful (like mold) or dangerous (like a deck that wasn’t built correctly or is in need of replacement/major fix),the buyer would have the option to either negotiate mitigations or walk away. The inspection also covers things like Radon, review and approval of covenants, survey or corner pin location, and more. We usually recommend that we include an “any and all inspections deemed necessary” clause so that if anything we need to look into further comes up in the inspection, we can facilitate. This is known as the “due diligence period” and is when all research about the property is done so that the home you’re buying doesn’t come with any nasty surprises you don’t want to discover down the road.
Next up we have the Financing Contingency. This basically says that if you are getting a loan to cover the cost of the home, and for some reason it doesn’t go through, you can walk away clean.
Now, the Appraisal Contingency. This will either say that the price of the home has to appraise for at least the purchase price, or a certain dollar amount. If the purchase price is higher than the appraisal, you might be able to go back to negotiating price, or you can walk away clean.
Title Contingency. This ensures that the Title to the home is free and clear of any liens and the Title Commitment can be issued to the buyer’s satisfaction.
Insurance Contingency covers the buyers’ ability to obtain home insurance on the property at an acceptable rate.
Lead-Based Paint Contingency covers the right to walk away if there is lead-based paint discovered in the home, and ensures a copy of “Protect Your Family from Lead In Your Home” is received. There will also be a disclosure covering this if the home was built before 1978 when the paints were common.
Additional provisions will cover anything else that need to be written in as a contingency, such as the tenants of the home be notified of the termination of their lease when it is up, the completed sale of the buyers’ current residence,or leased items integral to the home be transferred to the buyers at closing.
All these contingencies are designed to protect both parties from potential problems or circumstances in which a party will have to walk away from the sale. If something does happen that causes the sale to fail, the buyer will get their earnest money back, and can start fresh on a new home search. I hope this helps you better understand what being “under contract” means, and as always: the more you know the better off you’ll be!