What you should know about home selling or buying contingenciesMichelle McQuade | March 28, 2017
While not required in every transaction, home sale contingencies are very important in minimizing your home buying or selling risks. Contingencies can help protect you from any unexpected event that could put you at a financial disadvantage.
Contingencies are typically included in a purchase contract, but should be presented to both the buyer and seller as early as the negotiations stage. It would be wise to consider how a contingency may affect a transaction. Doing away with some contingencies can speed up the process, but you would also want to make sure that you are not taking major risks.
Here are three of the most common home sale contingencies in Ohio that you should know about:
- 1. Appraisal
Most buyers take out a loan to finance their purchase. Before finalizing the loan, lenders require an appraisal of the home to determine if the selling price is substantiated.
An appraisal contingency is usually included in a purchase contract. This allows the buyer several options if the appraiser finds the home’s value to be less than the selling price. The buyer can negotiate with the seller to lower the price, or get out of the transaction with the return of any earnest money paid.
The buyer has to make the decision before the end of the appraisal contingency period. Otherwise, the appraisal will be deemed acceptable to both parties without any change to the purchase contract.
Alternatively, buyers may opt for a financing contingency, which allows them to get out of the contract if they can’t obtain adequate financing due to a low appraisal.
- 2. Home inspection
Ohio state laws require sellers to provide a disclosure form that includes any known problems in the property, including defective appliances, electrical and system problems, zoning violations, termites, and hazardous materials like lead and asbestos. Other details, such as homeowners’ association fees and zoning violations, should also be disclosed.
In addition to this, buyers have the right to have the property inspected by a professional, who generally assesses the home’s condition from top to bottom and inside out. Additional tests and inspections, such as a termite inspection, may also be performed.
If any problem is uncovered by the inspections, the buyer may negotiate with the seller to have the necessary improvements done at the seller’s cost, or ask for closing cost credits. The seller’s options are to accept the buyer’s request, present other solutions, or refuse to do anything. In the third case, the buyer has the option to negotiate further, accept the seller’s decision, or get out of the deal. The decision has to be made before the end of the contingency period.
- 3. Sell existing home
Buyers may include a contingency that would allow them to sell their existing home before finalizing the purchase of the property. This means the seller will have to wait before they can receive the full payment for their home and close the sale. Depending on the agreement, the seller may continue to list the property under an “under contract” clause, but this could discourage potential buyers from bidding on the property.
Additionally, before agreeing to this contingency, the seller is advised to check if the buyer has indeed listed their existing property, for how much, and for how long.
For more home buying or selling tips, communities and Greater Cleveland Real Estate and Homes for Sale in Cleveland, Ohio, get in touch with the Top Realtor in Cleveland Michelle McQuade at (440) 823-2448 or (330) 257-8913.
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