Contingencies play a vital role in real estate contracts, allowing buyers, and sometimes sellers, to protect their interests and cancel the deal under specific circumstances. In this blog post, we will explore the most common contingencies in Northern Virginia, DC, and Maryland including home inspections, appraisals, financing, property associations, and home sale contingencies.
1. Home Inspection Contingency:
During a specified timeframe (typically 7-10 days), buyers can conduct a number of inspections (home, radon, well & septic) to assess the property's condition. They can negotiate repairs or credits with the seller or choose to cancel the contract if an agreement cannot be reached.
2. Appraisal Contingency:
This contingency ensures that the home's appraised value is equal to or higher than the sale price. If the appraisal falls short, buyers can request a price reduction or terminate the contract if the seller refuses to adjust.
3. Financing Contingency:
Also known as the Mortgage Contingency, this protects buyers in case they are unable to secure a loan. Typically, buyers have 21-30 days to obtain financing, and if unsuccessful, they can cancel the contract without forfeiting their deposits.
4. Home Sale Contingency:
For buyers selling their current home while purchasing another, this contingency allows them to proceed with the purchase contingent upon the successful sale of their existing property. If the sale doesn't occur within the agreed timeframe, the contract can be terminated.
5.POA/HOA/Condo Association Document Review Period:
The timeframe for a buyer to cancel a contract after receiving community association documents from a seller varies in DC, MD, and VA. In DC, buyers have a specific period known as the "Resale Package Review Period" to review the documents and cancel the contract if desired. The exact length of these periods is determined by the terms of the contract and local regulations, so it is crucial to consult with professionals for precise information based on the specific jurisdiction and contract involved.
Contingency timelines can be negotiated, typically ranging from 7 to 30 days. It's important for buyers to consult with their lenders and home inspectors to determine suitable timeframes for loan approval and inspection reports.
Contingencies are typically removed once the agreed terms are met. If the seller agrees to the contingency, it is removed. If not, the buyer can choose to proceed, propose alternatives, or cancel the contract without penalties. In case of disputes, real estate agents often assist in negotiating a compromise.
Understanding common contingencies is crucial for buyers. By navigating home inspections, appraisals, financing, and home sale contingencies, buyers can protect their interests and make informed decisions throughout the buying process.
(Note: This blog post provides general information and should not be considered legal advice. Buyers should consult with real estate professionals and legal experts for guidance specific to their situation and location.)
