In real estate contracts, contingencies are widespread, but buyers and sellers often don’t grasp them as well as they should. Contingencies protect buyers in general, but they also have important ramifications and implications for sellers. Then keep reading to learn everything you need to know about real estate contingencies for Philadelphia buyers and sellers.
What Are Real Estate Contingencies?
Let’s start with a broad description of real estate contingencies for both buyers and sellers in Philadelphia. “To protect the buyer and enable both parties avoid an unjust agreement,” contingencies are placed in the sales contract (which makes the offer a contingent offer).
“A contingent offer is an offer made by a potential property buyer to a seller that includes conditions that must be met before the sale can be completed. If the specified criterion(s) is/are not met, the buyer has the right to cancel the transaction and receive a return of the earnest money.
“An offer on a house and a purchase contract specify the price a buyer is willing to pay for a house as well as the terms under which they are willing to acquire it. Both the buyer and the seller will have responsibilities under the contract. The key responsibilities of a buyer are to get accepted for financing, have the home examined and appraised, and do it within a certain time frame. The seller’s responsibilities usually include agreeing not to accept any other bids and making the house available to inspection. The contingencies spell out these responsibilities.”
The Common Contingencies
In theory, a buyer can condition an offer on almost anything, but sellers are more likely to accept only the most frequent (and sensible) real estate contingencies. “Sellers are not required to accept every contingency that a buyer includes in a contract, and both parties must agree on all contingencies prior to signing a contingent offer.”
Be mindful that determining which contingencies to put in the contract necessitates some understanding of the local market. So be sure to consult a Philadelphia agent at (215) 385-3055 to find out the best method to create a contingent offer. The following are some of the most common contingencies you’ll encounter…
Inspection Contingency
This contingency simply says that if the inspector finds problems with the home during the inspection, then the buyer can walk away from the deal with no repercussions.
Appraisal Contingency
“An appraisal contingency has an impact on the loan procedure. If a home does not appraise for the price that a buyer has agreed to pay, the buyer has the option to cancel the transaction and keep their deposit. An appraisal contingency helps buyers avoid overpaying for their homes or becoming underwater on their mortgages because the appraisal process determines the fair market value of a home.”
Financing Contingency
The financing contingency, also known as a mortgage contingency, states that if the buyer is unable to arrange financing for the purchase, she can walk away from the contract with her earnest money in hand.
Title Contingency
Because it concerns ownership of the property being sold, this is an important one of the common real estate conditions. “The title report outlines the home’s ownership history. A title contingency states that the home will not be purchased unless the title report reveals that the property is free and clear of any liens.”
Home Sale Contingency
While not as common as the other real estate contingencies, this contingency can be a life-saver for buyers and quite a burden for sellers.
“The purchase of a new home is contingent on the buyer’s ability to sell their current property,” according to a home sale contingency. It specifies that if the buyer sells their home by a certain date, they will be able to acquire the new property and the contract will be completed. If they fail to do so, the contract will be cancelled.
Sellers are far less likely to accept this contingency than the others on this list. This is because a home sale contingency has a lot of risks and would leave the seller on the market in the case that the buyer does not sell their existing home.”
Contingencies Protect Buyers
In most cases real estate contingencies and designed and serve to protect buyers. The simple fact is that purchasing a home carries a lot of risk with it, and the contingencies can mitigate that risk.
“There could.,” for example, “be structural issues with a property, or the ownership of a property could be disputed. As a result, buyers should include contingencies in their bids so that if they discover a flaw in the property, the contingency will nullify the sale contract. The seller can relist their home and the buyer will receive their earnest money back if the contract is voided. This protects buyers who put down earnest money on a home by ensuring that they are both eligible to purchase the home if they so desire, but also not entitled to proceed with the purchase if additional investigation reveals that it is not in their best interests.”
Seller Considerations
Now it’s up to the Philadelphia sellers to decide which, if any, of the proposed real estate contingencies they’ll accept. And, depending on the facts and circumstances of each given transaction, this judgement varies. However, here are some guidelines…
Sellers, understandably, want the greatest price and terms possible, and in order to accomplish so, they must typically accept some contingencies. “It’s not uncommon to come across proposals that contain a number of preset contingencies. Buyers, for example, may prefer to limit their interest-rate risk to the current market rate at the time the offer is made. This is advantageous to both the buyer and the seller. If you’re a seller, you don’t want to waste time selling your home to a buyer who won’t be able to get financing.”
However, there are several contingency instances that you should probably decline. “An offer without a mortgage pre-approval – but with a financing contingency, a small down payment, and a low-interest-rate cap – should make you cautious.” An offer requiring a’satisfactory’ inspection without defining’satisfactory’ could lead to a can of worms you don’t want to open. Specifics are preferable to broad generalisations.”
Get Expert Help With Real Estate Contingencies
Contingent offers, albeit common, can be perplexing. Most Philadelphia buyers and sellers can benefit from the services of a local agent to avoid legal issues or a bag of worms in the real estate market. Contact us immediately at (215) 385-3055 if you need help navigating the murky waters of real estate contingencies.