Selling a home requires you to make a variety of complex decisions, all of which can affect your bottom line.
Real estate contracts typically include a few reasonable contingencies that are standard in the industry. However, if potential buyers request contingencies beyond those that are generally included, it is important that you consider carefully how those might affect your position.
Understanding Real Estate Contingencies
In legal terms, a contingency is a contractual condition that must be satisfied prior to completing the agreement.
When selling a home, potential buyers will likely ask you to agree to one or more contingencies specific to the purchase. For example, most real estate contracts provide the buyer with the opportunity to get a home inspection before committing to the purchase.
Two other conditions common to many home purchases are verification of the property’s insurability and a financing contingency. As a part of the financing condition, you also may be asked to agree to an appraisal contingency, in the event the home does not appraise for the contracted purchase amount.
Beware of Conditions that Could Affect Your Home Sale
The majority of potential home buyers will demand inspection and insurance contingencies. Most buyers also will insist on financing and appraisal contingencies, but are you obligated to agree?
The answer depends on a few key factors.
In a strong market, especially if inventory is limited, you may be able to refuse both. If you accept a contract for your bottom line price and literally can’t afford to accept a lower price, you can refuse an appraisal contingency on principle.
The contingency you should think hardest about accepting is one that requires the buyer’s current home to close before they close on your house. This has the potential to delay your closing or cost you the sale altogether.
Protecting Your Interests When Selling a Home
Before deciding on whether to agree to a potential buyer’s requested contingency, sit down with your Realtor® and review your goals for selling your home.
Consider the time frame in which you need to close and your price objectives.
Remember that even if you deny a buyer’s request for a contingency, you cannot compel them (usually) to close on your home. By refusing to include the contingencies, your sole remedy, should the buyer not close, is to keep their earnest money.
If you do agree to any buyers’ requested conditions, increase the earnest money sufficiently to compensate you, should they ultimately not close. Make contingencies date-specific as well, to ensure your home is off the market for the shortest possible time if the deal falls through.
In Yorba Linda and the surrounding communities, the Edie Israel Team of professional Realtors® understands the importance of protecting your interests. Our experienced team members can help you understand all the legal and practical aspects of your real estate transaction and ensure that your goals are met.
Contact us today to learn more about our team. We look forward to helping you through the complex process of buying or selling a home.