When you purchase or sell a home or other real estate, you will typically make an offer that may have some contingencies. A contingency is a condition that the parties may put into their real estate contract. Their presence is a way to protect the investment and to get out of the situation, depending on whether particular situations arise (as they often do). Read on to learn about some contingences you should be aware of if you’re purchasing a home in New York.
Some common contingencies are:
- Home Inspection Contingency: This contingency requires a certified home inspector to inspect the property within a specified time period. It’s up to the buyer to select the inspector and to schedule the inspection. Generally, the contract will contain language that provides for the termination of the contract if the inspection unearths issues that the seller isn’t willing to fix or negotiate. If the inspector does find problems, then you can request repairs or a lower price. This should be contemplated in the contract and should include how long it can take to remedy. If the seller refuses, then you can either allow the contingency to expire or terminate the contract and recover your deposit.
- Appraisal Contingency: This contingency is based on the property being appraised to confirm its value for your mortgage lender. Before your mortgage is set, the lender wants to make sure that the purchase price syncs up with the fair market value. The lender usually determines appraisal values based on comparable recent home sales, tax records, and an in-person evaluation of the property by a third-party appraiser. If the appraisal is in line with the purchase price, the sale will go on, but if the appraisal comes in lower than the purchase price, you should discuss options with your loan officer. If you can’t work out a loan restructure, the appraisal contingency allows you to rescind your offer without losing money.
- Financing Contingency: This contingency (aka mortgage contingency) is a provision that allows you to back out of the purchase if you can’t secure financing within a certain timeframe. You can cancel the transaction and recoup your earnest money.
- Sale Contingency: If you’re already a homeowner, and you want to buy a new one, there’s the issue of whether you sell your existing home first. This contingency provides a specific timeframe for you to sell your current home. If you can’t sell it in by the deadline, you can withdraw your offer and recoup your earnest money deposit.
Get Legal Help with Contingencies
Sometimes you may not want to have a contingency. Perhaps, you’re trying to make an offer more attractive to the seller. But if you need it, it’s something that a skilled attorney can help you with. Get in touch with one of our knowledgeable MOWK Law attorneys who can help tailor your contract to meet your needs and expectations. Contact us right away to get started.