Purchasing a new home is normally the biggest investment you’ll ever make and once you’ve bought a home, it’s a decision you can’t easily reverse.
Contracts of sale offer various contingency clauses that allow you to negotiate the contract or possibly render the contract null and void.
Some of the main contingencies in contracts are:
• Financing contingency—This allows you to spell out the terms of your financing such as amount of down payment, maximum interest rate, loan type (such as FHA, VA, etc.), and the timeframe in which the lender has to obtain commitment of financing.
• Home Inspection contingency—This contingency offers you the chance to inspect the home for major issues in mechanical and structural systems of the house.
A home inspection contingency does not always offer a buyer an unconditional right of rescission, but it can be requested specifically.
The timeframe allowed for the home inspection to be completed is usually within five to 14 days from the date of contract acceptance, and the inspection addendum language is very specific as to when buyers and sellers must respond to each other when repairs are requested, or the buyer can lose their ability to void the contract based on the inspection findings.
• Appraisal contingency—This contingency usually works where if the appraisal value of the home comes in for less than what you offered, you can request that the seller reduce the price accordingly, or the contract can be voided.
However, FHA loans must appraise at the contract price, so the appraisal contingency is built into the FHA addendum language in essence.
Other options with an appraisal contingency include the buyer and seller meeting at an agreed upon price, or if it doesn’t affect ability to obtain financing, the buyer can accept the appraisal even if it’s less than the appraisal value.
There are several other contingencies available, such as mold inspections, chimney inspections, well/septic inspections and Homeowners Association/Condo Association contingencies.
The fine print and the timeframes are very important when it comes to contingencies in a contract, so be sure to pay attention and read and discuss your contracts thoroughly with your licensed Realtor.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
