It is so exciting when a buyer finds a home they fall in love with and puts a contract on it! When an offer turns into a contract, the buyer will have to write a check for a deposit at that time, which can be cashed and used at the closing. What many buyers don't realize is that during the closing process, their deposit money could be at risk if they are not paying attention to the timelines of the contingencies that are in their contract.
In the state of Florida, there are three main contingencies which you need to stay on top of during the closing process:
The Inspection Contingency: This is the period of time you have to do the inspections of the Orlando property. It is also known as the inspection period. Since the time period is negotiable, it typically varies between 5 to 15 days from the effective date of the contract. Basically, you are able to do any type of inspections you want for the property during that time period; however, the property has to be left in the condition it was in at the time of the contract. These inspections typically consist of a home inspection as well as a termite inspection, but they could also include a septic and well inspection. Also, keep in mind that the buyer would be paying for all of the inspections, not the seller.
By the end of the inspection period, the buyer has to make some decisions depending on the type of contract they have on the home. Since most REALTORs in Florida use an "As Is" contract, we will focus on this type of contract.
With an "As Is" contract they would need to let the sellers know by the end of the inspection period if they are moving forward with the contract or backing out. They could also ask for some repairs on the property; however, per the contract, the seller would not be required to do them. If they decide to back out of the contract, they would be able to get their deposit back, but they would not be refunded for the money they spent on the inspections. If they wait until after the inspection contingency period to back out of the contract, they would, unfortunately, lose their escrow. Always make sure that you understand when the inspection ends!
The Appraisal Contingency: This is usually performed after inspections and is usually within the 2nd or 3rd week of the contract. If the appraisal comes in at or above the contracted price, the purchase can proceed to move forward with the lender. However, if the appraisal comes back lower than the contracted price, the buyer could back out of the contract and get their deposit back. Since the buyer is responsible for the payment of the appraisal, it is important to be partnered with an experienced REALTOR who can make sure you are not wasting your time on an overpriced listing prior to going under contract.
The Financial Contingency: The last and typically the longest contingency is the financial contingency, which is typically 30-45 days from the effective date of the contract. This is the period of time that the buyers have to receive a commitment letter from their lender stating that their lender will be providing them with the funds necessary to purchase the property. During this period of time, the buyer will be working closely with the lender to provide them with the paperwork needed to process the loan.
This is also the period of time that the appraisal would take place on the property. If the buyer is unable to get the loan prior to the end of the financial contingency, they would be able to get out of the contract and get their deposit back. However, if it is after the financial contingency they would, unfortunately, lose their deposit.
If the buyer is purchasing their Orlando home with cash, there is no financial contingency within the contract.
All in all, the most important thing you can do as a buyer is make sure you are working with an experienced and knowledgeable REALTOR who is able to take care of all of the transnational deals so you don't get into a situation where you are able to lose your deposit. Working with the wrong agent could cost you thousands of dollars if they fail to keep you informed and on top of all of the contingencies within the contract.
