You hear the word a lot in a transaction...but do you know what it actually means? We wanted to keep the explanation very simple.
A contingency is a condition that has to be met PRIOR to closing escrow (officially finalizing the sale of a home). If you cancel during your specified contingency, it allows the return of the Earnest Money Deposit (initial deposit made by the buyers).
View our video on Instagram here: What is a Contingency? | Tip Tuesday
An important thing to note- JUST because the contingency is DUE for removal on whatever the specified day, does NOT mean they automatically expire. You have to PHYSICALLY, IN-WRITING, remove your contingency.
Below are the contingencies that are pre-written in the purchase contract (offer):
Inspection Contingency (17 days)
Buyer's contingency to conduct an investigation on the property. This informs the buyer of the condition of the home.
Appraisal Contingency (17 days)
Buyer's contingency if they are using a loan to purchase the home. The lender orders an appraiser to make an evaluation (professional opinion) of the home and make sure it is worth the amount of money that the buyers offered to pay for it. They will also make sure the home is safe to live in according to any local health and safety codes.
Loan Contingency (21 days)
Buyer's contingency to make sure the loan is finalized and they have full approval to purchase the home. The lender will direct when it is safe to remove this contingency.
And sometimes you'll see:
Seller's Purchase of Replacement Property (17 days)
This is a separate form that can be submitted by the sellers during negotiation. If the seller is trying to locate another home to buy, they can use this form to give them a timeframe to find another home with the option to close on the replacement property concurrently (at or around the same time)
