Imagine finding the perfect house for your family with a price tag within your budget. But due to the hot real estate market and competition for the property, you decided to leave out the recommended contingencies in real estate transactions. Unfortunately, what seemed too good to be true quickly became a nightmare once your family began living there. The plumbing had major issues requiring expensive repairs; the roof leaked during every storm, and worst of all — the basement flooded whenever it rained heavily.
However, if there had been contingencies in place, such as requiring a home inspection before purchase or a clause requiring the seller to repair any damage before closing, you could have avoided these issues.
At McCarthy & Akers, PLC, our experienced Virginia real estate attorneys go to work for you! We are a full-service real estate law firm here to assist you when you’re ready to sell or purchase real estate. We can handle all aspects of the sale or purchase and advise you on the real estate contingencies you need in your contract. Call a member of our team at (540) 722-2181 to schedule your consultation. We are happy to answer any questions you may have.
What Is a Real Estate Contingency?
Real estate contingencies are an essential part of the home buying and selling process. A real estate contingency is a clause in a contract that states specific conditions must be met before a property can be sold.
Generally, contingencies protect buyers and sellers and allow either party to back out of the agreement if certain conditions are unmet. For example, it's common for buyers to add a financing contingency, which means the buyer must secure financing for the purchase within a specific timeframe; otherwise, the seller can back out of the deal or renegotiate terms with the buyer.
While most sellers prefer to receive a buyer's contingency-free offer, they can be valuable tools for both the buyer and seller. Contingencies come in many forms, but the four most common in Virginia are inspection, mortgage, appraisal, and home sale contingencies.
1. Inspection Contingency
An inspection contingency gives the buyer the right to inspect the property before finalizing the purchase. Inspections are more thorough than appraisals and give the buyer a more comprehensive view of the home's problems.
It allows the buyer to confirm that the property is in good condition and that no significant repairs are required. Even if a property appears in good condition to the naked eye, it is difficult to predict what costly repairs may be necessary. Frequently, there are electrical, plumbing, and heating issues, pest infestation, foundational damage, and even health hazards such as asbestos.
During the contingency period, the buyer can hire inspectors and other specialists to conduct a comprehensive property inspection. If the inspection reports identify necessary repairs, the buyer and seller can negotiate who will pay for them. If the buyer discovers that the property is not what was represented, they can use the inspection findings to bargain for a lower price or even back out of the deal.
2. Mortgage Contingency
A mortgage contingency, also known as a financing contingency or a loan contingency, is a clause that allows buyers to cancel the home purchase contract without penalty and receive a return of their earnest money deposit if they cannot obtain a mortgage. The seller can then pursue other offers.
The contingency period typically lasts between 30 and 60 days and must be negotiated between the buyer and seller in the purchase agreement.
3. Appraisal Contingency
Obtaining an appraisal is usually the most critical condition that banks require before granting a loan since the appraisal determines the property's fair market value. If the appraised value of a property is lower than the purchase price, the buyer can renegotiate the purchase price with the option to walk away if the seller rejects the offer.
A professional and licensed appraiser typically performs a property appraisal. Their duties include estimating the home's value and producing a written report with an appraised value attached.
4. Home Sale Contingency
The home sale contingency states that the transaction will only be completed if the buyer's current home sale closes. This contingency allows buyers to use the cash proceeds to purchase a new home. Essentially, the seller waits for the buyer's buyer to find financing, which takes longer than they would like. A home sale contingency typically lasts 30 to 60 days, depending on the housing market. The agreement terminates if the agreed-upon time passes.
These are just four types of common contingencies in Virginia real estate. Your Virginia real estate attorney can advise you on the needed contingencies to put in place to protect your real estate transaction.
Contact McCarthy & Akers, PLC – Your Real Estate Lawyers in Virginia
As you can see, real estate deals are often contingent on many factors that protect both the buyer and seller in case something goes wrong during the purchase process. If you’re searching online for “real estate lawyers in my area,” contact the real estate lawyers at McCarthy & Akers, PLC instead. We are a full-service real estate law firm and coordinate all aspects of the sale and can represent you as the buyer or seller of the property. We take out all the guesswork, so both parties are satisfied and can move forward with the sale.
If you are buying or selling a property and have questions about contingencies or other real estate transactions, contact our Virginia real estate attorney team from one of our offices in Strasburg, Woodstock, Front Royal, Winchester, Manassas, and Warrenton at (540) 722-2181. Or fill out our online form to schedule your consultation. Let us go to work for you!
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The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
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