Today, David talks about the two most common contingencies that are in a real estate sales contract and how they affect the seller. Before we dive in, what is a sales contingency? A sales contingency in a real estate sales contract gives the buyer an opportunity to cancel the contract and receive their escrow money back. Now, let's go over the two types:
The first contingency in a real estate sales contract is the inspection period and is typically 7-10 days. On a Florida As-Is contract, the buyer has the right to inspect the property and is able to back out of the contract for any reason before the end of the contingency. The buyer would then receive a full refund of their escrow deposit. The buyer is able to perform as many inspections as needed to feel comfortable moving forward with the transaction. The typical inspections are the home inspection and the wood destroying organism inspection, which we will go over in a later video.
The second contingency is the financing contingency. Unless the transaction is a cash deal, the buyer will be obtaining a mortgage loan on the property. According to the financing contingency, the buyer will have 30 days on a conventional loan and a little longer on a VA or FHA loan to obtain a loan commitment from their lender (unless a different timeframe is negotiated). If a buyer is getting a mortgage loan, it is important to get a pre-qualification letter from their lender, which will state the loan amount the buyer is approved for. It is important for a seller to know if the buyer can afford their property before accepting a contract.
The advantage of working with a real estate agent as a seller is an agent should get the pre-qualification letter up front. Once they have the pre-qualification letter, they should then contact the lender to verify they have documentation to support the loan amount. If the buyer is not able to get a commitment letter, the lender has to provide a written denial of the loan to the seller. As long as this is done before the end of the financial contingency the buyer will be able to cancel the contract and receive a full refund of their escrow deposit. Choosing to work with a real estate agent who understands these contingencies will make the transaction go a lot smoother!
