Strong contingencies are absolutely essential to ensure you have no regrets with your purchase. One of the top homebuyer regrets is getting stuck in a deal and not doing thorough research. These protect you from that with no penalty. The most common contingencies we will be including in our offer include…
Financing Contingency: this allows you to back out if you’re unable to secure a mortgage. If for any reason your loan is denied you will be protected within a certain timeframe.
Inspection Contingency: this gives you the option to request repairs or renegotiate the price based on the inspection report. If for some reason the repairs and issues are too large and you are totally uncomfortable you can cancel with no penalty within a certain timeframe.
Appraisal Contingency: this allows you to renegotiate the price if the property appraises for less than the offer price. It also doesn’t force you to increase your offer and pay more if the seller won’t negotiate. You then have the ability to cancel with no penalty within a certain timeframe.
Title Contingency: this ensures the property has a clear title, free from any liens or encumbrances.
Resale Package Receipt: this is where you approve of the rules and regulations of the Homeowners’ Association you are buying into. After reviewing you can cancel with no penalty within a certain timeframe if you don’t approve.
Home Sale Contingency: this makes the offer contingent on the successful sale of your current home. This one is not very common but another piece we can use – it doesn’t lock you in if your current sale and buyer gets cancelled.
The due diligence period is one of the most important pieces of our offer. This is a protection for you as the buyer that guarantees you are not locked into a purchase if a variety issues show up ensuring your earnest money deposit is protected.
The most common due diligence period is the home inspection. This is usually 7-10 days and allows you to get the home inspection done and negotiate any repairs. If for some reason there are serious issues you are not comfortable with you are allowed to cancel with no penalty. We will also get the seller’s real property disclosure – or SRPD. This is a disclosure that the seller completes that requires them to disclose if anything is wrong with the house. But it’s important to know that this is to the best of their knowledge. Sometimes there are things wrong with the house that the seller doesn’t know about. Maybe the fifth bathroom that the seller never uses doesn’t work correctly. We offset this by getting the home inspection. These together create a total overview of the home.
The second due diligence period is the appraisal. This is rarely done on a cash purchase but very common on a financed one. This is where your lender orders an appraisal which will validate our offer price. This ensures you are not over paying for the home. Now given all the previous work we did to determine our offer price in the previous section, it’s not very common for me to have issues. But occasionally it happens and it’s a great protection. This is usually 14-21 days.
The last due diligence period is the loan. Clearly this doesn’t apply to cash purchases but nearly every buyer getting a loan will have this. This is important because if for some unforeseen reason your loan is denied, you get that deposit back and are protected. This is usually 17-28 days.
All of these overlap and happen at once. The clock starts right after we get an accepted offer.
Two other due diligence periods that aren’t talked about a lot but are also very important are the preliminary title report and the resale package.
The preliminary title report details the property’s ownership history, any existing liens or encumbrances, and other matters affecting the title. Reviewing this report is essential to ensure the property has a clear title, free from legal disputes or claims that could impact your ownership rights. Think of this as an inspection of the legal standing, whereas the home inspection is the physical standing. This is mostly a concern on cash purchases because the majority of lenders will not approve a loan with issues on title.
Next the resale package. Now this only applies to a property that’s in a homeowner’s association. This usually isn’t a big deal because we’ll do thorough research on the association going in, I call them directly to verify any questions you have before writing an offer, but you still have the opportunity to review the resale package and approve or cancel.