offer you receive will probably contain some buyer escape clauses
known as contingencies. A contingency gives buyers the right to
pull out of the deal if some specific future event, such as getting
a mortgage, fails to materialize.
create uncertainty for you as a seller. The more contingencies buyers
put in a contract, the more ways they have either to get out of
the deal or to reopen negotiations for better terms. Unless you
have people falling all over themselves to buy your house, most
offers contain contingencies.
most common contingencies are:
inspection contingencies: Your house's physical condition
greatly affects its value. Smart purchasers insist on finding
out exactly what shape your house is in before they buy it. If
they don't approve the inspection reports or can't reach an agreement
with you about handling corrective work for problems uncovered
during the inspections, these contingencies let the buyers bail
out of the transaction.
contingencies: The buyers can withdraw from the contract if
the mortgage specified in their contract isn't approved. That
provision is usually fine. If the buyers can't get the loan they
need to buy your house, why go any further. Here's a typical loan
upon buyer getting a 30-year, fixed-rate mortgage secured by
the property in the amount of 80 percent of the purchase price.
Said loan's interest rate shall not exceed 7.5 percent. Loan
fees/points shall not exceed 2 percent of loan amount. If buyer
can't obtain such financing within 30 days from acceptance of
this offer, buyer must notify seller in writing of buyer's election
to cancel this contract and have buyer's deposits returned."
common contingencies give buyers the right to review and approve
your property's title report and, if you're selling a condominium,
the condo's master deed, bylaws, and budget. Buyers can make their
contract contingent upon many other reasonable events, such as
having their lawyer review and approve the contract or having
their parents inspect the house.
What good, you may wonder, is a ratified offer riddled with escape
clauses? We're glad you asked.
the buyers' viewpoint, a contingency-filled offer still shows
your intention to sell them the property. The buyers don't have
to worry that you'll sell the house to someone else while they're
spending time and money inspecting it.
your perspective, a contingency-filled ratified offer ties up
the buyers. If the buyers deposit earnest money into the trust
account to prove that they aren't toying with your affections
and then spend hundreds of dollars more for inspections, they're
serious buyers. There isn't a standard "earnest money"
deposit. The actual dollar amount varies from area to area, depending
on local custom and practice.
Next Step: Selecting the Best Offer
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