Contingencies in Real Estate Contracts
In real estate contracts the contingency is a common element. Contingencies are clauses in a contract that give either the buyer or seller a way to get out of the contract if certain conditions or timelines aren’t met. A commonly used example is that of a buyer making an offer on a new home before selling his existing home. The buyer needs to sell his present home before being able to get financing on the new one. So he makes his offer contingent upon the sale of his existing home. There will always be a time period associated with such a contingency. If the buyer is able to get his present home sold within that time period, the deal can go forward. But if he fails to sell within the specified time period, the seller has the option of getting out of the deal. In most cases, sellers won’t accept this kind of contingency, because they will most likely feel that they can find another buyer capable of closing the deal without needing to sell another home first. But new home builders are often willing to accept an offer contingent upon the sale of an existing home.
Every contract can be unique.
The possibilities for contingencies are virtually endless. Some of the more commonly used contingencies would include:
Contingencies that depend on the buyer being able to obtain financing are very common.
Probably the most common type of contingency is the “contingent upon satisfactory completion of inspection”. There are any number of specific types of inspection for which a contingency might be included in a contract. Some of the more common would include inspection by a qualified home inspector for hidden defects, pest inspections, water and sewage system inspections, inspections dealing with the presence of radon or mold, etc.
It’s not unusual for a buyer to have a contingency that allows for a formal appraised value at or above purchase price. Since lenders will nearly always want an appraisal performed too, sellers usually don’t have a problem with this.
Remember, just like everything else in real estate contracts, contingencies are negotiable. Always take care before signing that you are comfortable with all contingencies included in your contract. Likewise, take time to think about what contingencies you might like to have added.
Buying Foreclosures / REOs
What's an REO?
"REO" or Real Estate Owned are properties which have been foreclosed upon that the bank or mortgage company now holds. This is different than real estate up for foreclosure auction.
If you buy a property during a foreclosure sale, you must pay at least the loan balance plus any interest and other fees accumulated during the foreclosure process. You must also be ready to pay with cash in hand. To top everything off, you'll receive the property totally as is. That possibly may include existing liens and even current denizens that may require expulsion.
A bank-owned property, on the other hand, is a much cleaner and attractive option. The REO property was unable to find a buyer during foreclosure auction. Now the lender owns it. The bank will take care of the elimination of tax liens, evict occupants if needed and generally arrange for the issuance of a title insurance policy to the buyer at closing.
You should be aware that REOs may be exempt from normal disclosure requirements. For example, in Nevada, it is optional for foreclosures to have a Property Disclosure Statement, a document that normally requires sellers to tell you about any defects they are informed of. By hiring Lynn Pace Real Estate, Inc, you can rest assured knowing all parties are fulfilling Mississippi state disclosure requirements.
Are REO properties a bargain in Cleveland?
It's frequently presumed that any REO must be a steal and a possibility for easy money. This isn't always the case. You have to be prudent about buying a repossession if your intent is make a profit. Even though the bank is typically anxious to offload it quickly, they are also motivated to get as much as they can for it.
Look closely at the listing and sales prices of competing homes in the neighborhood when making an offer on an REO. And factor in any repairs or upgrades necessary to prepare the house for resale or moving in. The bargains with money making potential exist, and many people do very well buying foreclosures. However there are also many REOs that are not good buys and may lose money.
Ready to make an offer?
Most banks have staff dedicated to REO that you'll work with in buying REO property from them. Normally the REO department will use a listing agent to get their REO properties listed on the local MLS.
Before making your offer, you'll want to contact either the listing agent or REO department at the bank and learn as much as you can about what they know regarding the condition of the property and what their process is for taking offers. Since banks typically sell REO properties "as is", it may be in your best interest to include an inspection contingency in your offer that gives you time to check for unseen damage and cancel the offer if you find it. As with making any offer on real estate, your offer may be more attractive if you can include documentation of your ability to pay, such as a pre-approval letter from a lender.
After you've submitted your offer, you can expect the bank to make a counter offer. At this point it will be your choice whether to accept their counter, or offer a counter to the counter offer. Be aware, you'll be contending with a process that probably involves several people at the bank, and they don't work evenings or weekends. It's quite common for the process of offers and counter offers to take days or even weeks. Lynn Pace Real Estate, Inc is accustomed to these situations and will work to ensure there are no undue delays.
The Home Buyer Checklist
The Home Buyer Checklist identifies some of the important factors to consider when choosing a home. In addition to an affordable sales price, you will also want to be sure that the neighborhood and house meet the needs of your family.
Take this checklist along when you go shopping for your house. It will help you evaluate the neighborhoods and assess the availability and condition of various features of up to three homes in a side-by-side comparison.