I want to first take a moment to acknowledge the work you have put into discovering what the perfect home looks like for you and committing to this process. Discovering what moves you when it comes to real estate is exciting but not always easy!
Your reward is being able to walk into the perfect home for you, knowing it’s the one, and going for it with 100% clarity.
Now that you’ve won the deal and are under contract, what’s next?
Buyer Contingencies
Not to bore you too much, I’ll quickly explain the contract to buy and sell real estate. It’s essentially the legal instrument used to buy and sell real estate and outlines the duties of both parties within the agreement.
This agreement has milestones that must be met leading up to closing, which
These dates and deadlines generally will provide you a way out of the contract. Meaning you, as the buyer, is able cancel the contract for a specific reason and get a full earnest money refund.
In this week’s blog post, I will cover the Top 3 Buyer Contingencies when purchasing a home with a mortgage. Here they are in the order they occur:
#1 Inspection Contingency
The 1st major milestone is the home inspection. During this part of the process, we’re checking on the condition of the house. We’re making sure it’s going to be what you expect it to be. That you’re not going to be walking into a bunch of repairs and expenses that you didn’t anticipate.
This occurs within the first 7-10 days from contract. If we have had a great tempo and cadence with them in putting the deal together, I might shoot this to a 3-5 day timeline to get the inspections done. And then we start negotiating the items that come up that we want to resolve.
It’s a fast deadline so all parties can go their separate ways if the home has major defects that cannot be resolved.
The Common Inspections You Will Perform as the Buyer:
- Limited visual general home inspection.
- Sewer line inspection with
video camera. - Radon test in the basement or crawl space.
When inspection items come up, you have several options to resolve them. All within prescribed dates and deadlines outlined within the contract.
The 2 Outcomes You May Seek After Inspection:
- Inspection Objection – a written description of any unsatisfactory condition that Buyer requires Seller to correct. This could range from cleaning and servicing the furnace to replacing the sewer line.
- Termination – meaning the Buyer wishes to terminate the contract due to
any unsatisfactory condition. This typically occurs if a major defect exists like foundation issues.
If an Inspection Objection has been delivered to the Seller, you and all parties will negotiate to resolve those items keeping the contract in place. If a resolution is not complete within the deadline, the contract will be terminated. This deadline is known as Inspection Resolution.
The outcomes you must get into agreement with other parties in an Inspection Resolution:
- Seller agrees to correct all or some inspection items before closing.
- Buyer to withdraw the Inspection Objection, buying the home as-is.
- Buyer to terminate if Seller’s Inspection Resolution is unacceptable.
These are the nuts and bolts of the inspection contingency. Negotiating these deadlines can be straightforward on homes with few items but very complex on homes that have laundry list of repairs.
#2 Appraisal Contingency
The 2nd major milestone is the appraisal. This one has fewer moving parts compared to inspection. It occurs within 14-28 days from contract. On a standard 30 day close, the appraisal deadlines occur around day 21. Most lenders will order the appraisal on your behalf after the inspection contingency has passed.
The 3 Main Appraisal Deadlines You Must Meet:
- Appraisal Deadline – the date the appraisal must be 100% complete and delivered to the lender and buyer for review.
- Objection Deadline– the date you would object to the appraised value of the home if below the purchase price.
- Resolution Deadline – the date both you and Seller must agree to complete the sale at the lower price (appraised value) or terminate.
These deadlines are fairly cut and dry. If the appraised value is less than the purchase price, we’re going to have to deal with that via an objection. The seller is going to have to work with us on reducing the price to appraised value or the contract will terminate.
In some cases, a seller will order another appraisal to challenge the lower value if all parties agree to do so.
If an appraisal comes in higher than the purchase price this does not change the purchase contract. The agreed-upon price will not increase.
#3 Loan Termination
The 3rd major milestone is the loan review. This deadline is designed to protect you against predatory lending. Meaning you may cancel for any reason as it relates to the loan.
“this contract is conditional upon Buyer determining, in Buyer’s sole subjective discretion, whether the New Loan is satisfactory to Buyer, including its availability, payments, interest rate, terms, conditions and cost.”
Once the final loan review is complete it’s smooth sailing until closing! That’s the final deadline all parties must actually meet, sign the closing documents with a notary, and transfer ownership of the home.
Dates Change
As I write this blog post, I want you to know that things change. If dates and deadlines need to be extended it’s OK! All parties can amend the dates and deadlines of the purchase contract at any time.
For example, imagine an inspection uncovering items that require a contractor to bid the repairs. If the bids take longer than the Inspection Resolution deadline, all parties can agree to extend and allow the bids to come in.
Next Week…
Closings are generally full of smiles, hugs, and gifts. If you haven’t experienced one try it sometime! 🎉🤗 Let’s wrap up this month and talk about Owning Your Perfect Home. I’ll be covering my top time savers and home ownership hacks to get you moved in quickly with less stress. See you then!
