Generally all sales contracts for the purchase/sale of a house have some contingencies, i.e. that if certain conditions are not performed, the buyer or in some cases, the seller, can withdraw from the contract without penalty.
THE MAJOR CONTINGENCIES are as follows:
- The financing contingency: The Contract is contingent on the purchaser obtaining a loan to purchase the property within a certain period of time. The lender will advise you how long it will take you to get loan approval, but generally it’s no more than twenty to thirty days. Thereafter the closing will take place in a week or two.
- The appraisal contingency: The contract is contingent on an appraisal of the property. An appraisal is always required by the lender. Sometimes the parties obtain their own appraisal prior to entering into the contract, but be forewarned that even if you obtain your own, the lender will still require the borrower / purchaser to obtain and pay for theirs, i.e. they will not accept yours as proof of the fair market value of the property. The time period for obtaining the appraisal is typically 21 to 28 days.
- Contract is contingent on a home inspection: Virginia is “old school” in that we are a “buyer beware” (caveat emptor) state. Other states have elaborate forms which a seller must provide to the buyer setting forth the condition of the property in great detail. We are NOT one of those states. In Virginia, the buyer is responsible for determining the condition of the property and the seller will not be held liable for same as long as they did not actively mislead the purchaser. Home inspections are a good idea. Their cost is between $350 and $1,000 depending on the level of inspection you require. If you need help finding a home inspector, we can provide you with referrals. The time period for obtaining the home inspection is typically 14 to 21 days.
- Termite and/or pest inspection: The contract is contingent on a satisfactory termite/pest inspection. We generally recommend the buyer pick the inspector. The cost is nominal ($75.00). If termites or other wood destroying insects are found, treatment will be recommended. The seller typically pays for same. If termite damage is discovered, the seller must remedy same prior to closing. The time period for obtaining the termite inspection is typically 14 to 21 days. There are many termite inspectors in the Northern Virginia area. If you need assistance locating one we can give you referrals.
THE LESSER (USED) CONTINGENCIES are as follows:
- Radon. Radon is a naturally occurring gas often found in basements. You can test for it and if present, have a radon mitigation system installed.
- Sale and Settlement of Purchaser’s Property. Often times the purchaser has a home they must sell in order to be able to buy the Seller’s property. There is a contingency for this which generally says that purchaser must sell his home in a certain period of time and the contract will be null and void. Typically, if the Seller gets another offer while the Purchaser is trying to sell his home, the Purchaser must remove the contingency in a short period of time or prove to the Seller that he can still purchase the Seller’s property, without selling his existing home. In these situations, Purchaser’s sometimes get “bridge loans” in these situations.
- Seller finding a home to move to. On occasion, Seller’s will want the contract contingent on their finding and contracting for a home to move to when they sell their home. Often times when this occurs the settlements are not simultaneous and the seller must rent back from the purchaser after closing. All this is negotiable.
- 1031 Exchange. This is tax deferred exchange that parties sometime choose to use to delay and even avoid the payment of capital gains taxes. It usually does not delay or hinder settlement. If necessary, we can assist the parties with their exchange.