This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist. Enjoy!
Questions: We’re making an offer on a home that has been on the market for a few weeks and want to include contingencies, what is normal?
Answer: Contingencies can be used by buyers to reduce their risk in a real estate transaction by allowing them, in specifically defined scenarios, to renegotiate contract terms or cancel a contract without losing their Earnest Money Deposit. The three most common contingencies are the home inspection contingency, financing contingency and appraisal contingency.
The shift in market conditions over the last 3-4 months has meant adjusting from a market where most winning offers did not include any contingencies to a market where many buyers are able to include at least one or two contingencies, often all three.
This week I thought it would be helpful to refresh everybody’s understanding of the three most common contingencies and what protections they provide to buyers.
Home Inspection Contingency
- Purpose: Allows buyers to hire a licensed home inspector who will provide a detailed assessment of a home’s condition and recommendations for repair, replacement and maintenance.
- Structure: The inspection contingency offers two options. One being the ability to void the contract after the inspection and the second being the option to void and the option to negotiate for repairs or credits based on the results of the inspection.
- Timeline: In most cases, I see inspection contingencies last 3-10 days and if there is a negotiation period, those often last 2- 5 days.
- Purpose: Protects buyers if they do not get approved for their loan and allows them to void the contract or delay closing without losing their Earnest Money Deposit.
- Structure: The financing contingency can either automatically expire at the end of the contingency period or extend to the closing date, unless the seller takes formal action to remove it after the contingency period ends.
- Timeline: In most cases, I see financing contingencies last 10-24 days. It is a good idea to consult your lender on this timeline.
- Purpose: Protects buyers in the event the property appraises for less than the contract purchase price. It allows a buyer the option to void, renegotiate or proceed.
- Structure: In some cases, through a separate addendum, buyers may agree to waive a specified difference between the appraised value and purchase price and make the appraisal contingency only if the appraisal value is below a certain number.
- Timeline: In most cases, I see appraisal contingencies last 10-24 days. It is a good idea to consult your lender on this timeline.
As a buyer, it is important to understand that the use of, structure, and timeline of contingencies in your offer play a significant role in how a seller responds to your offer.
In some cases, contingencies (or lack of) may have a greater influence on negotiations and a seller’s response than price, so it is important to approach contingencies thoughtfully and strategically based on your interest in a home, days on market, and an assortment of other factors.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460
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Arlington and its neighbors have become more segregated in the last 10 years while fair housing legislation at the state level faces significant roadblocks. Arlington’s fair housing enforcement, education, and commitment to equity practices in housing policy and programs are beginning to show signs of improvement but much more needs to be done.
Join the NAACP Arlington Branch, HOME of Virginia, and Equal Rights Center for the 2nd Annual Arlington Fair Housing Conference on April 15th to discuss the threats and opportunities to advancing fair housing policy across the state and within Arlington.
The half-day, in-person event will feature speakers from fair housing advocacy organizations and government agencies including the U.S. Department of Housing and Urban Development, and focus on fair housing policy trends in Virginia and Arlington County. The conference aims to advance the understanding of issues and policies related to equity and affirmatively further fair housing among local officials, advocates, and members of the public.
2nd Annual Arlington Fair Housing Conference
Is home ownership a goal of yours in 2023? Now is the time to make it happen! Grab a (virtual) drink with the area’s top Real Estate experts, learn all about the home buying process and on how you can get $1,500 towards your closing costs immediately!
Did you know the average Arlington renter will spend $150K in 5 years of renting? Stop paying down someone else’s mortgage! Join us for a Rent vs. Buy Happy Hour on Wednesday, April 5th at 6 p.m. via Zoom. If this time doesn’t work, we also are offering times convenient for your schedule!
A lot has happened in the local market since the beginning of the pandemic. Sip on your drink of choice and learn from Northern Virginia, Arlington and Washingtonian Magazines top producing agents! We will discuss the latest market updates, the home buying process and rent vs. buy cost savings. Please RSVP by clicking here.
Call/text Manavi at 703-869-6698 with any questions!
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