Contingencies when buying a home
So, you finally found a home. It took a little bit of time, if you haven’t noticed, inventory is extremely tight right now. I often get asked once we go under contract, what are some of my off ramps, better put, what are the contingencies. I figured if I was getting asked this a bunch of times, there is probably a few people out there that have wondered the same thing. A little caveat before you read any further — This is for Virginia, every state is different. Also, you could of course put your own contingency in the contract. For example, this sale is contingent on the successful close of your property. You would use this if buying a home was contingent on your current home selling first. Let’s get it to the contract contingencies.
- Financing — Our first contingency. If, after diligent effort to attempt to secure a loan, and you are unsuccessful, you will be released from the contract with full earnest money deposit. In Virginia, you have 7 days to make full loan application once a contracted has been ratified, If you follow those deadlines, and make an effort to get everything your lender is requesting , and still get denied, you will get your earnest money deposit back, and released from the contract.
- Home Inspection — This one many know, and are relieved to hear. Let me clear up this contingency though. After the home inspection, if the house needs major repairs, you CANNOT just walk away. You have to request the seller make repairs, and the repairs have to be material defects. If the seller says no to the repairs, then you have the right to walk away, with full refund of your earnest money deposit.
- Appraisal — This one many do not think about. Your bank will send an appraiser out to the property, typically after a few weeks into the transaction. The appraiser will go to the property and determine the value of the property. If the value of the property is lower than the sales price, a purchaser has a few options. Go ahead and move forward, and pay the difference themselves, or request the seller lower the price to the appraised value. If the seller says no to lower the price, you have the right to back out of the contract, with full refund of the earnest money deposit.
- Termite Inspection — Again, this is one of those things that is state specific. The seller is required to provide the purchasers with a termite report dated no more than 30 days prior to close. If the inspection shows there is damage from termites, or an active infestation, then the seller is required to fix, and treat the termites. If they say the do not want to do this, then you have the ability to walk away, with full refund of the earnest money deposit
- Septic & Well — The seller is also required to get their septic system inspected(if applicable) and also have the well water tested(if applicable) If there are issues with either one of these, and they refuse to fix the issue, you will have the chance to walk away, with full refund of your earnest money deposit.
- HOA Docs — The seller is also required to provide the purchaser with HOA docs if they live in a community that has an HOA. This is another one that is state specific. Once you or your agent receive the HOA docs, you have 3 days to review. If in those 3 days, you, the buyer decide you do not like the HOA, you can get released from the contract, no questions asked, with full refund of the earnest money deposit
So, there you have it. These are all of the contingencies you have as a buyer when purchasing a home. I hope this helped to clear some things up for you, and of course, if you have any additional questions — just reach out.