In part 1, we looked at what happens immediately after the seller accepts your contract to purchase. In part 2, we’ll cover contingencies ― those tasks you must complete according to the contract’s stated timelines.
Contingencies
Remember all those deadlines we set for you when I assisted you with filling out the purchase agreement? Those items are known as contingencies, and we must work diligently and quickly to fulfill the requirements of them. The most common contingencies include:
- Financing: The purchase is contingent upon getting the loan at the rate you requested.
- Sale of the buyer’s property.
- Home inspection contingency: The findings must be acceptable to you.
- Subsurface sewage treatment system and well inspection, pest inspection, etc.
- Inspection of HOA documents.
- Appraisal: The home must appraise for the offering price.
Inspections
Various inspections are, aside from the appraisal contingency, the most common contingencies, so they deserve special attention.
A whole-home inspection by a licensed, experienced home inspector is a must, whether you are purchasing a newly built home or an existing home. Once the home is in your name, it’s your responsibility – warts and all.
Remember, a home inspection is a visual inspection of the home’s major systems. The inspector can’t tell you what is lurking behind walls or beneath floorboards.
Inspections typically take between two to three hours and you should plan on attending yours. There is nothing that replaces being there when the inspector notices a problem and hearing about it first-hand. Feel free to ask questions and keep asking until you get answers.
If the inspector notices items that merit closer scrutiny you may need to hire additional professionals, such as a pest inspector, a licensed contractor or an engineer.
Appraisal
The most important part of the lending process is the home appraisal. The lender chooses an appraiser who will visit the home to determine its current market value. The value must be the amount you offered for the home or more.
If the appraiser determines that the home is worth less than the amount you offered, you have a decision to make between the following choices:
- Challenge the appraisal.
- Add more cash to the down payment.
- Request that the seller lower the price.
- Both you and the seller contribute the cash required.
- You walk away from the purchase.
Generally, the seller needs to remedy the situation by lowering the price. After all, should you decide to walk away from the deal, the next buyer’s appraiser will come up with a similar valuation. If the seller truly wants to sell the home, she will need to lower the price.
Once the contingencies are removed, we’re clear to close! In part 3 you’ll discover what you need to know about the closing process.
