We wanted to take a minute to talk about real estate contingencies today. They are an important part of every real estate contract because they can help buyers protect themselves if problems come up after earnest money has gone into escrow.
There are two primary contingencies: for the inspection and for the financing. These are the two that we see come up in just about every transaction.
We typically start with the inspection contingency. The inspections usually take place in the first week after contract, and the buyer has the opportunity to say whether or not everything checked out and if they want to move forward. Sometimes after an inspection, buyers will ask the seller to make certain repairs or something may get renegotiated.
Then, we typically move into the second tier of contingencies, for the financing. Buyers need to be pre-approved in almost all situations to buy a property, and that’s because the seller will want assurance that the buyer actually has the means to buy the home.
After the inspection, things shift to the lender to do their due diligence with the buyer. This is when the appraisal takes place in order to put a value on the property. Usually the contingency expires after about 30 to 45 days, and the buyer has to give the seller some sort of letter or statement letting them know they are approved for the mortgage and are ready to go.
There can be other contingencies for association documents. In Minnesota, there is a 10-day review period for certain types of associations to look over documents, for example, or a buyer contract contingent on them selling their own home.
We’d be happy to discuss other more specific contingencies with you at any time if you have questions. Reach out to us soon via phone or email.