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A question we are often asked is ” How Do Home Sale Contingencies Work“. We’ve addressed the answer if you scroll down; in a simple manner, but they can be more complex. This is also a quick overview of the home sales process in Illinois, the times allowed for inspections and how our home sale contingencies work. It’s important to remember that every state in the US is different and we can only write about the state we are licensed in.
How Do Home Sale Contingencies Work And Inspection Periods
Your home is for sale, you’ve agreed terms and all parties have signed the purchase agreement. A contract is in place.
Both buyer and seller are advised to have use an attorney for Barrington real estate sales. Our contract allows 5 business days for a review of the contract. Your attorney may request a changes to any of the contract with the exception of the agreed price.
The following 5 days are used to reach agreement on any changes.
Home Inspection Period
Your buyer has 5 days to carry out whatever inspections they desire, lead based paint is 10 days. During the same 5 day attorney review period any issues relating to the inspections will be raised. The following 5 days are used to reach agreement on resolutions to those issues.
Loan Application Deadline
Your buyer must submit a formal mortgage application within 5 days of the accepted contract.
Home Insurance Period
Your buyer has 10 days to make sure they can obtain the necessary home insurance.
Mortgage Funds Deadline
Your contract will have a date by which your buyer needs to provide what we call a “Clear to close” from their lender. Ths means the funds are available for the buyer to buy your home. There are usually a few conditions that still need to be met and will be done at the closing table. Most lenders these days will verify that the source of a buyers income still exists the day before closing. I guess we can understand that, given the problems over the last few years.
Home Sale Contingencies
These contingencies are not present in every contract and they can get complex. We’ll try to make them understandable for all. We suggest you go over any home sale contingency with your listing agent. We are talking here from the perspective of a seller who has accepted a contract which is subject to a home sale contingency.
There are two types: Home Closing and Home Sale
Home Closing Contingency.
Your buyer has sold their home but want to close on their sale before they close on the purchase of your home. This is usually because they either need the funds from their sale to buy your home, or their lender has made it a condition of the new mortgage. Their home sale agreement can be at any stage. Their sale contract may have started 5 minutes ago and nothing has been done yet or they could be all done except for the closing. You’ll need to understand the risks and your listing agent is the best person to explain this to you. There are far too many variables to have a stab at it here without confusing you, believe me.
Home Sale Contingency.
Your buyer has a home to sell but does not have a buyer for their home yet. In fact they may not even have their house listed yet. They want you to accept their purchase offer subject to them selling their current property. The reasons again are likely financial. You have to consider the risks of stating that your home is under contract and not getting many if any new buyers look. We are required by our MLS to mark your home under contract. Most buyers are not going to bother looking at a home under contract.
This type of contingency has a time frame on it. In other words you give your buyer some time to sell their home. 60 days is an example but what if the average marketing time for their community is 6 months? It’s a risk. Your listing agent should let you know the pros and cons. Then you make an educated decision.
What Happens If A Contingency Passes
If a contingency passes and the party has not completed the function and not requested an extension, technically that contingency is forfeited. An example would be if a buyer does not have their inspections done within the 5 allowed days and does not request an extension, they’ll no longer be able to seek resolutions to anything on a report.
Your attorney and myself will keep a careful watch on those dates to make sure we comply with everything we need to do. The other side should be doing the same.
Closing Your Sale
Once all contingencies are passed, and the attorneys have done everything they need to, your attorney will schedule your closing. If everything has gone to plan that original date on the contract is likely to be the date you’ll close, but it can be changed as needed. Often sellers choose not to attend this closing, in which case the documents you need to sign will have been pre-signed by you either in your attorneys office or if that’s not possible – perhaps you have left the state – in the presence of a notary.
Rest assured we’ll attend your closing and take care of handing over any keys or garage openers. We can answer any last questions the buyers might have about the home.
Ready to sell? Call us at 847-363-3686.