The Offer –
Once a buyer decides to purchase your home, an offer will be prepared using an As-Is Contract for Sale and Purchase. We will confirm receipt of the offer and review it with you. It’s important to understand all aspects of the offer including the offer price, the closing date, the financing terms, the inspection period, the distribution of closing costs and any contingencies. Your options will be to accept the offer, decline the offer or make a counter offer. We will then present your offer reply to the selling agent or the buyer. The offer will continue to be negotiated until it is either accepted or folds.
The buyer will sign off on the disclosures and pay the Earnest Money Deposit (EMD). The buyer will also be asked to provide proof of funds, if paying cash, or a pre-approval letter from their lender if financing the purchase.
Contingencies –
A contingency clause defines a condition or action that must be met for a real estate contract to become binding. A contingency becomes part of a binding sales contract when both parties, the buyer and the seller, agree to the terms and sign the contract. Some of the more common contingencies include:
- Appraisal Contingency: The appraisal contingency is used when the buyer wants to make sure that the property is valued at at least the specified amount.
- Financing Contingency: Also referred to as a mortgage contingency, the buyer can gain more time to obtain financing in order to purchase the property.
- Home Inspection Contingency: This contingency provides the buyer with an opportunity to have the property inspected and negotiate the purchase price or repairs based on any findings.
- Home Insurance Contingency: This contingency requires the home buyer to purchase a home insurance policy, and flood insurance not to exceed a specified price by a certain date. This contingency is oftentimes a requirement from the lender.
- Right To Assign Contingency: A right to assign contingency is especially useful for wholesale real estate investors, as it provides the option to back out if they are unable to assign the contract to another buyer in a timely manner.
- House Sale Contingency: This contingency provides a period of time for the buyers to finalize the sale of their current property.
- Kick-Out Clause: The kick-out clause helps to protect sellers when their buyers use a house sale contingency, allowing them to back out if they find a more qualified buyer.
- Title Contingency: If there are any issues with the title, such as an ownership dispute or lien, this contingency allows buyers to walk away if the problem cannot be resolved before closing.
If the conditions of the contingency clause are not met, the contract becomes null and void, and one party (most often the buyer) can back out without legal consequences. Conversely, if the conditions are met, the contract is legally enforceable, and a party would be in breach of contract if they decided to back out.
The Contract –
Once you and the buyer agree to all terms of a contract, the contract will be signed by all parties and we will go under contract. A request for title services will be submitted to the title company or attorney as determined in the contract. The EMD (Earnest Money Deposit) paid by the buyer will be held by the closing agent and applied to the purchase price at the time of closing.
The buyer will then proceed with submitting the financing application, ordering inspections, ordering the appraisal, survey & elevation certificate. Repairs may be requested. If requested repairs prevent the buyer from obtaining financing or insurance, we suggest you make the repairs or offer concessions to the buyer. These items include safety issues, code violations and 4 point inspection items. A title search will be run to ensure a clear title. The buyer will bind insurance. If and when all contingencies are met, we will move forward to closing.