Kari McCoy commentary: What buyers and sellers need to know about contingencies

Question: Dear Kari, I am in a difficult situation. I put my home up for sale and now the buyers will not remove their contingency. My real estate agent wants me to wait, but I want to throw in the towel. I would like to start over with a new buyer for my home. Please furnish me with some guidance. Answer: Thank you for your serious question. A contingency in real estate refers to a certain condition or action agreed to in the purchase contract that must be met by the sellers or buyers and possibly sometimes both before the completion of the home sale. The purpose of contingencies are to protect buyers and sellers from issues that could arise during the real estate transaction. Since earnest money is not forfeitable until all contingencies are removed by the buyer, there must be a set period of time a buyer has to meet all the necessary requirements. That set time is referred to as the contingency period. In a real estate contract, the contingency period begins as soon as a seller accepts a potential buyer's offer. The exact time frame for each contingency is negotiated between the buyers and sellers up front in the agreed upon purchase agreement. Depending on what the certain contingency is will determine how much time is required. For example, if the buyers are fully lender approved for a mortgage, the contingency might only be 10 days instead of normal 25 days. The advantage in this situation would be to provide the sellers with a firmer sale in a shorter amount of time. In the event the terms of the contingency is not met, either or both parties involved have the right to back out of the deal and buyers will receive their deposit money back. Let's look at a few common real estate contingencies: · Home inspection contingency allows the buyers to have property inspections before fully committing to moving forward with the sale. If a problem arises due to the home inspections, the buyers can elect to try to negotiate with the sellers or cancel the sale without penalty and receive their deposit money back. · A mortgage loan contingency, also known as a financing contingency, is a clause that allows buyers a timeframe to secure a mortgage or cancel the sale without penalty and receive their deposit money back. · Appraisal Contingency allows the buyers to cancel the sale or renegotiate price if the home appraisal value is lower than the agreed to purchase price. On or before the contingency removal date, the potential buyers must submit in writing the contingency removal form, indicating their desire to proceed with closing on the home. If this doesn't happen, sellers have the right to serve the buyers with a written notice to perform. Once the buyers receive this, they must either back out of the sale or remove all the contingencies and continue with the closing of the home. It is not uncommon for contingencies to cause a sale to be delayed or fall apart. However, good real estate agents will most likely advise sellers and buyers to try to compromise and provide several ideas to hold the sale together. At this point of the sale, many buyers and sellers have difficulty separating their emotions and take it personally. They need to take a step back and put their emotions, anger and personal feelings aside and understand this is simply part of the process to secure the closing. In the case the home sale fails, the major setback for both parties is time. Buyers have to start over. They then have to spend time finding a home again that will fit their needs, negotiate with a different seller, pay for more home inspections, appraisal fees, etc. The sellers must remarket their home, receive buyer showings, open houses, buyer negotiations and then start the escrow period all over again. Today's home sales can be complex and sticky and not all real estate agents are the same. It's important to find a good agent that can help you make smart decisions and avoid costly and timely mistakes. I wish you the best of luck.