I'll Buy It, So Long As ...

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Let’s say a company manager gets transferred and must move to a new city to start work on the first of September. Her three kids need to be in school for the fall quarter and her writer husband also faces a tight assignment timeline and needs a settled place to pore through research documents.

The family finds a home they like and have a contract but want to make sure they can secure it before all the deadlines kick in. They’re in luck, being able to specify they’ll buy the home by a set date, say Aug. 15, or be able to walk away.

Such an option is called a contingency, in which purchaser and seller agree on a sale as long as certain conditions are met.

Contingencies offer protection but can also leave one of the parties in a bind if the deal falls through.

“When you’re ready to make an offer on a home, adding a contingency to your contract can give you time to assess the property and feel confident that it is a sound investment,” the Charleston Pier Partners team of Carolina One Real Estate notes in a recent newsletter.

The partners pointed out types of contingencies “to safeguard an investment,” including:

- A financing contingency, which makes sure buyers can step away if their loan doesn't work out. “If you're unable to secure a mortgage or terms and conditions change (in a big way), you can back out without penalties,” the team notes.

- Inspection safeguard, which allows enough time for a professional home checkup. “Should issues be found, you can negotiate with the seller to make repairs or adjust the sales price,” the partners point out.

- A contingency involving the appraisal. If the value winds up below the sales price, the buyer likely would have to come up with the difference, renegotiate the deal or “back out without losing your earnest money,” according to the real estate team.

- Home sale protection in cases when someone is selling their home and purchasing a new one. The contingency gives buyers a set time to sell, or if they’re unable to do so, to withdraw and get back their earnest money.

- Occupancy contingency, which gives possession of a home on a specified date.

According to a 2014 article at www.realtor.com, contingent offers are “pretty standard” and also fairly common.

The home inspection contingency is among the most important, Angela Colley, the piece's author, notes.

“Never in my life have I seen a home inspection waived,” Bishoi Nageh, vice president of branch operations for The Petra Cephas Team at Mortgage Network Solutions, tells Colley.

If something is wrong with a house, a good inspection will find it, she says. Nageh cites a case in which the buyer asked the seller to fix windows and wound up finding mold growing under the framework. “Once you know the problems, you can talk with the seller about what they need to fix before you buy the home,” she says.

The appraisal contingency keeps shoppers from forking over more money for a home than it's worth. “It's in no one’s best interest to overpay,” Nageh says in the Realtor.com article. “If the home comes in under the (asking) amount, you have the right to back out.”

Colley explains that in a hot market, a buyer might think about waiving the contingency, figuring they'll lose out otherwise. But that could lead to them paying more out of pocket, since the lender will only finance up to the appraised amount.

The benefit of contract contingencies is there’s “no risk to the buyer,” says Elizabeth Weintraub in a March piece in The Balance.com.

Citing state law in California — followed by many states — she explains the common contingencies such as financing, inspection and home sale as well as some item-specific ones. They include federal laws that give buyers 10 days to test for lead-based paint, “wood destroying pest” inspections such as for termites, roof inspections, sewer tests to see if tree roots are clogging pipes, and checks on mold or related hazards such as radon gas and asbestos.

Another possible contingency would be to require private well inspections — in cases in which the home doesn't get water from a municipal system — to make sure the wells are meeting health standards.

“If the well does not pass inspections, it is not unreasonable to ask the seller to remedy the situation,” Weintraub says.

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