All you sweet Beach show followers know that ALL of my articles come from Real life problems or challenges that happen during my week; I conduct a therapy session by bringing them before you. So thanks for listening. So many things have already come up this week with 2 short sales buyer back outs after 5 months, one going into foreclosure and lending and appraisal issues. . . where do we start? Although all that needs some reflection I had another issue that came up this week and I think many people are not aware of how some of the contingency issues work in Florida. So lets talk a little about common Purchase Contract Contingencies that a buyer may utilize.
I have a sell going on and we are waiting on an appraisal and holding our breaths to make sure it flies and the question was. . . What if it does not appraise? Does the buyer have to buy it? For the most part the answer is NO. Unless the buyer states that the offer is cash and does not put an appraisal contingency in the contract, then failure of property to appraise is an acceptable back out of a contract. The bank will require an appraisal by a third party that has no interest in the sale to determine the property value. There was a time in the distant past that a buyer would just come to the table with some extra cash to buy that dream hacienda. Not saying that NEVER happens but do not count on it. Many cash offers today include an appraisal clause in the contract.
Another common contingency is the inspection period which varies from state to state and can be explicitly stated in the contract. If the sale is an AS IS with right to inspect then the buyer can get an inspection and at his sole discretion get out of the contract if he does not like the findings of the inspection. If a buyer has a regular contact such as FAR 9 then the seller is required to fix any warranted or safety items. The seller and the buyer will discuss and come to terms with how that is handled. But for clarification sake it is the duty of the seller to have those items fixed by a licensed professional and may be required to have a re-inspection before close.
Federal law also gives a buyer 10 days to inspect for lead paint. Don’t run for the hills this will only apply to older homes but again ask your trusted Realtor. We will talk about Chinese Dry Wall another time!!!
Lender approval is another facet of contingencies embedded in the contract unless waved, and even though a customer has a pre-approval letter that does not mean that he has the loan locked in. Any number of things can happen and sometimes do so if a buyer can not attain a loan he has a suitable back out of a contract. A perfect example as happened in one of my deals today was a buyer who lost their job before the property went to close. She now no longer qualifies for her loan so was able to legitimately get out of her contract and have her earnest money returned.
I have heard in the past contingencies called weasel clauses because they allowed a person to weasel out of a contract. That does sound kind of slimy but the fact is contingencies are a necessary part of the Real Estate transaction, and your Realtor can explain all of these to you. Remember I am not a lawyer and I do not even play one on TV so this is meant to be a basic intro to contingencies as they relate to a typical sale in Florida. Thanks for being my therapist one more time.Print Story