Understanding Your Rights As a Buyer or a Seller When the Sale Is Conditional
Contingency clauses are prevalent in real estate purchase agreements. Contingencies are conditions that must be met before the contract can be finalized and the sale of the home complete. Understanding your rights and obligations with regard to contingencies is key to a successful closing.
At Team 805 Real Estate, we know that contingencies can be overwhelming. For many sellers, it may seem like the buyer holds most of the power. Our highly trained team can help you prepare for these clauses and ensure that you are protected whether you are selling or purchasing a home. Contact our real estate experts today at (805) 341-0398.
Arguably one of the most important home buying contingencies is the home inspection. An inspection contingency allows the buyer to walk away from the contract if there are problems found during the home inspection. Generally, a buyer pays for the inspection and reviews the report with their realtor.
Problems that may be discovered during the home inspection include:
- Structural damage
- Electrical issues
- Plumbing problems
- HVAC failures
In many cases, a realtor representing the buyer will either ask the seller to repair the issue or advise their client to ask for a price reduction. If the seller is unwilling to remedy the problem, the sale may not go through. Many times both the buyer and seller want the contract to be fulfilled and can reach a compromise.
What to Know About Home Inspections
It is important to note that a home inspection is meant to bring code violations, significant issues, and even minor or potential problems to the buyer’s attention. Home inspection reports tend to be dozens of pages long and can be quite intimidating to either party.
An experienced real estate professional can help sort out what needs to be addressed and how to handle it. It is not uncommon for a house to be tented for termites prior to removing the inspection contingency.
In the event that a property needs repairs or has damage, a realtor will negotiate with the seller or their representative, always representing their client’s best interests.
Mortgage or Financing Contingency
A buyer may make the purchase contingent upon them obtaining financing. The price of housing, particularly in Southern California, makes it necessary for most people to secure a mortgage from a qualified lender.
Today, many buyers make themselves more appealing to sellers by getting a pre-approval letter from a lender. The pre-approval letter shows the amount of financing that a buyer is approved for and can help relieve a seller’s anxiety that a buyer will be unable to perform due to financing.
An appraisal contingency is another necessary clause that can protect a buyer from purchasing a home well over its market value. Under this condition, the sale of the home is contingent upon the property appraising for a certain amount.
If the property does not appraise for the asking price, the buyer must either come up with the balance in cash, or the seller can reduce the cost. Appraisal contingencies are critical when a buyer is financing a property since the lender will not finance more than what the home is worth.
Other Home-Buying Contingencies
In addition to contingencies related to a home inspection, financing, or appraisal, a buyer may also make the purchase conditional on a clean title. A title contingency allows the buyer to terminate the contract if a title search reveals that there are outstanding liens or that someone other than the seller has ownership. A clear title is vital, but a realtor may be able to resolve any issues.
Less common contingency clauses:
- Home sale contingency (the sale is conditioned upon the sale of the buyer’s current home)
- Feasibility contingency
- Insurance-related contingencies
- Seller’s rent back contingency
Contingencies can protect both the buyer and seller. Both parties should consult with their real estate agent before removing contingencies. In competitive markets where homes are getting multiple offers, it can be tempting for buyers to waive contingencies in order to secure the contract. A realtor can help you decide whether this is a sound strategy or if you would be losing your right to walk away from a bad deal.
Looking to Buy or Sell in Ventura? Get the Expert Guidance You Need.
If you are looking to buy or sell in the Ventura area, contact Team 805 Real Estate at (805) 341-0398. Get the white-glove service you deserve from Southern California’s Premier Real Estate Agency! Call today to get started.