Nothing is certain when it comes to a house purchase. The buyer makes a bid, but it’s contingent on a variety of factors. What if the buyer can’t get financing? What if the inspector or appraiser uncovers major issues with the home? What if the buyer can’t sell their current residence?
These are all things that make buyers ask for contingencies on their purchase contract. If you make a contingent offer, though, what happens? How does it all play out?
You Have a Time Frame
First, you have a time frame that your contingency will be good through. The attorneys involved in the process will set the date that is fair for everyone involved.
Each contingency may have its own expiration date. For example, you’ll probably get a longer time for a housing contingency because you need time to sell your home than you would for an inspection contingency. The seller can arrange for the inspector to come out relatively soon and then it usually only takes a few days to get the report to the buyer.
It’s important to pay close attention to the time frame. If you miss the expiration date, you may let the contingency expire without you doing anything about it.
Some contingencies are what they call ‘hard contingencies.’ This means that everyone must sign off on it in order to move forward. Soft contingencies, however, just expire without warning; there’s no need for any signatures.
You Have a Method That You Must Cancel the Purchase
If you utilize one of your contingencies and cancel the purchase contract, you have to go about it the right way. You can’t just pick up the phone and tell the seller that you aren’t going to buy the home. You must follow what its states in the purchase contract.
Typically, you have to inform the seller in writing. This makes it official. It’s also a great way to include everyone else that may be involved in the transaction, such as the real estate agent, loan officer, and attorneys. Although, you’ll probably have your attorney draw up the letter to make it even more official.
In any case, as long as you are within the timeline of the contingency, you will get any escrow money back that you put down on the home. The escrow agent will refund the money and the seller is free to put the home back on the market.
Of course, each contract will have its own requirements. Some sellers may be fine with a phone call, while others may want a more formal process.
Going Past the Contingency Date
Now if you decide after the contingency expired that you want to cancel the purchase, you are in a different situation.
In this case, you won’t get your money back. The seller has the right to keep your earnest money because you backed out of the contract after the contingency date. The seller can then put the house back on the market to try to sell it to someone else.
It’s important to discuss the contingencies you want to include in your purchase contract with your attorney. He/she can tell you if the contingencies are a good idea as well as make sure that it’s fair for everyone involved.
It’s very important that you pay close attention to the details of the contingency, especially the expiration date. If you have a real estate agent or attorney working with you, stay in close contact with them so that you are all on the same page. This way you can make a solid decision regarding the home purchase as the contingency expiration dates come near.