3 Most Common Contingencies in Real Estate
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Hey everyone, it's Rachel Clark. Today I'm going to go over the three most common contingencies in real estate.
What is a Contingency?
A contingency in real estate is an acknowledgement that the house will close, provided that a certain event will happen prior to the house closing and is agreed upon by both parties.
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1. Inspection Contingency
The first most common contingency is the inspection contingency, which gives the buyer the right to inspect the property and have the home inspected within a specific time period, such as 10 days per the Arizona purchase contract. It protects the buyer who can cancel the contract or negotiate repairs based on the findings of a professional home inspector.Â
2. Loan Contingency
The sale is contingent upon the buyer obtaining loan approval described as a loan in the executed purchase contract. For example, that would be a conventional loan, a FHA loan or a VA loan.
This means that the buyer is acting in good faith and providing any and all requested information or documents by the lender in a timely manner and not doing anything to compromise the qualification of your loan.Â
Some examples would be opening a new credit card or debt consolidation, or quitting your job or going on a furniture shopping spree before your home closes.Â
Your credit needs to remain the same from when you started the loan process so that you can successfully obtain your loan and close the deal on time.
So why does that matter to you? The loan contingency protects the buyer. If after a good faith effort, you can not obtain your loan, you can cancel the deal and retain your earnest money.Â
3. Appraisal Contingency
The buyer's lender will order an appraisal after the buyer is through their inspection period and both buyer and seller are ready to move on with the sale. Per the Arizona purchase contract, the appraisal has to come in at purchase value or higher. If it doesn't, the buyer can cancel and retain their earnest money.Â
I hope this blog was helpful and helped you understand what some of the top contingencies in real estate are. If you have any questions, please don't hesitate to reach out!
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Rachel Clark
Hi, I'm Rachel!
As a Tucson native, I have been fortunate enough to experience everything Tucson has to offer! I love being able to speak to people on a daily basis who are either looking to move to Tucson or are fortunate enough to already live here! You can reach out too. Send me a text, give me a call or shoot me an email. I'm here to help however I can when it comes to moving to Tucson!
