This is probably the most important contingency in a real estate transaction. If you are paying cash for your home, then this contingency does not apply to you. However, if you are getting a loan, then the lender must approve your loan and fund it in order for you to close on the house. If you're a buyer, its very important to have a pre-approval letter from a lender when making an offer. This demonstrates that you are ready to buy to a seller. If you are selling your home, as your listing agent, I'll screen each offer and ensure that each prospective buyer is pre-approved with a lender. If during the closing period, the financing falls through for reasons outside of the buyer's control, the contract can be terminated and the earnest money returned.
The home you are buying has to appraise for no less than the sales price. However, if it does appraise for less, then the seller will either have to lower the price, or you can choose to cover the difference, or walk away from the contract and get your earnest money back. The appraisal is usually ordered by the lender, or an appraiser of your choice if you are paying cash.
To help my buyer clients be as successful as possible, I will typically offer to a seller that we will have a home inspection and make our requests within two weeks of an accepted contract. Based on the findings of the report, both parties re-enter into negotiations. The South Carolina contract outlines the major categories of repairs: roof, structural, electrical, plumbing and major mechanical systems. Anything can be asked but cosmetic repairs are hardly ever considered. The sellers can agree to repair everything or nothing and anything in between. The buyers can accept a credit at closing or a reduction in price instead of repairs. As your real estate agent, I'll help guide this process and work closely with you to protect your interests. If negotiations fail, then you will have the right to terminate the contract and get your earnest money back.
Often called the termite inspection, this contingency is very important in our warm, coastal climate. While rare, a termite infestation could be detrimental to the property. In addition to termites, this inspection will check for wood-eating organisms that could negatively impact the structure. This inspection is similar to the home inspection contingency. Buyers and sellers negotiate needed repairs. If negotiations fail, the contract can be terminated and earnest money released back to the buyer.
Sale of Another Home Contingency
Unless your current home is already under contract, most sellers will not want to accept a contract that is contingent on the sale of your home. Most sellers will not want to take their home off the market while you try to sell yours. The seller that accepts this contingency will probably not be willing to negotiate much on the price unless they are really motivated.
Other Real Estate Contingencies
The contingencies mentioned above are the most common in a real estate transaction. However, there are other contingencies that could be added to the contract. For example, if the buyer has not seen the Seller Disclosure yet, then the contract can be made contingent on the buyer's approval of the Seller's Disclosure. Or contingent upon granting the buyer's pre-occupancy before the sale or granting the seller's occupancy after the sale. Any stipulation in addition to the contract should be covered in a contingency. Promises are made on paper!