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Realities of Real Estate: Contingencies; We’re sold, but …

When buyer and seller both sign a contract, that doesn’t mean the home is sold, nor does it mean that the buyer must purchase the property no matter what. Most every contract we see is filled with a variety of contingencies designed to protect the buyer. A good buyer’s agent will make sure these protections are part of a contract.

At the same time, a well-constructed contract should not be so full of contingencies that the seller begins to wonder whether the buyer is actually committed to completing the sale.

Here are some of the more common contingencies:

Financial: In most cases, buyers will need to secure financing to purchase property. As a result, it is typical to see some sort of financing contingency in a contract. Usually, it will describe the amount the buyers plan to finance, the type of financing, the interest rate they’re seeking and how many days from the date of contract acceptance they need for final loan approval. If the buyer is unable obtain the financing outlined in the contract, the offer can be declared void.

However, the buyers must make a good-faith effort to secure financing. They cannot deliberately sabotage their own financing as a way to escape the obligations of a contract.

Another financing contingency is an appraisal. Even if buyers are paying cash for a property, they might make the sale contingent on having a certified appraiser determine if it’s worth what the buyer has offered. Should the appraisal come in below the sales price, the buyers and sellers could agree to reduce the sales price to the appraised value, negotiate a new price or void the contract. It is the responsibility of the buyers, or their lender, to obtain the appraisal, and the buyers must pay for it. Typically, an appraisal will cost $400 to $500.

Inspections: Everything might look fine on the surface, but without professional inspections, the buyers have no way of knowing if a home’s structural, mechanical, electrical and plumbing systems are in working order. So, an inspection contingency can be made part of the deal, giving the buyer a chance to check these things out.

An inspection contingency might be pretty basic, or it could be detailed; it all depends on the property. For example, if a house has a well and septic system, there are specific inspection contingencies for those items. On a waterfront home, the buyers might want to have the bulkhead or dock inspected. On an older home, there could be the possibility of asbestos or lead paint. All of these things are fair game for a property inspection.

However, that doesn’t mean anything falls within the scope of such inspections. Potential problems must rise to the level of being “significant.” Additionally, a home inspection is not to be used as a way to renegotiate price.

Once an inspection is complete, the buyers can ask the sellers to make repairs. If the sellers agree to make all the legitimate repairs requested, the contingency is satisfied. If the sellers say they’ll make some or none of the repairs, the buyers can withdraw from the contract.

Community contingencies: Frequently, a property is part of a homeowners or condominium association and subject to rules and regulations. There are addendums in a contract that give buyers the right to review these regulations and determine whether they are acceptable.

The sellers must provide the buyers with a specific set of association documents; it’s often referred to as a resale package. The buyers then have a certain number of days to go over this information, and if there’s anything they can’t live with, the buyers can withdraw from the contract — without needing to state a reason.

Other contingencies: There can be a myriad of other contingencies that could be included with an offer. A specific one that sellers hate to see is the home-sale contingency. That’s where buyers make the offer on a new home contingent on the sale of their current property. As sellers know, it can be hard enough to sell a house without also needing to worry about a second sale.

If the buyers’ price is right on both the property they’re purchasing and the property they’re selling, then it’s something sellers might sit still for. But, in most cases, it’s difficult to buy a house, when you make it contingent on a home sale. Moreover, buyers lose all their negotiating power in such circumstances. If you want to move, it’s better to get your current home sold first, then go shopping for the new one.

In sum, contingencies are an important part of a contract. When you sit down with your agent to write an offer, be clear about which contingencies are “must have” and which are “nice to have.” As buyers, you want to be protected, but even if sellers are OK with the price, they still might say “no, thanks” to a contract heavily laden with contingencies. A well-trained agent can help guide you toward a balance that will lead to a successful sale.

Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is