5 home purchase contingences commonly Every home buyer's worst fear is entering into a contract and subsequently changing his or her mind only to find out that it's too late to cancel without losing their good faith deposit. To prevent this the standard purchase contract in Pennsylvania includes some contingencies or "outs" that allow the buyer to do some research on the property before making a final decision. Here's a list commonly seen contingences that are included in the agreement of sale solely for the protection of the buyer. 1.Home Inspection Contingencies - Usually a home inspection contingency is part of the purchase contract. This means a home buyer can cancel the sale or try to negotiate repairs based on the results of a home inspection report. Here are some common inspections that a buyer may have done after signing a purchase agreement: a.Termite - A visual inspection of the readily accessible areas of a home for evidence of wooddestroying insects (WDI) and wood-destroying organisms (WDO). The inspector will visually inspect the entire interior of a home (including accessing and entering any sub-space such as basements and crawlspaces) and exterior of the property. b.Lead Based Paint - This is a surface investigation lead by a certified inspector to determine whether or not there is lead-based paint in a home. Lead-based paint inspections determine the presence of lead in paint, dust, and soil using precise testing. It is particularly helpful in identifying where lead is present prior to purchasing, and to identify potential sources of lead exposure at any time. c.Mold - Mold testing can tell you if you have a mold problem in your home. Mold tests can also help you find hidden mold, measure your indoor air quality and identify what species of mold is in your home. There are 3 kinds of testing; Air, surface and bulk testing. The good news is if you have a mold problem, it can be removed. d.Radon - Radon is a colorless, odorless, tasteless radioactive gas that's formed during the natural breakdown of uranium in soil, rock, and water. Radon can seep into the home from the ground through cracks and holes in the foundation. Radon gas can also contaminate well water. It is considered a health risk to have radon gas since it is a carcinogen and can cause lung cancer. If high levels of the gas are found, you should immediately call your state EPA office for a list of qualified mitigation contractors to control it. 2. Financing Contingency - A financing contingency is a condition that allows the buyer to walk away from a transaction if it is unable to secure financing. It protects the buyer from any legal ramifications that may arise if the loan cannot close. On a purchase agreement there is a certain date that the loan must be secured by that the buyer and seller agree upon. While a finance contingency clause does add risk for the seller, most buyers will not sign a contract to purchase a home without one. Sellers can protect themselves by requiring the buyer to provide a mortgage prequalification letter which will prove the buyers credit worthiness.
3.Appraisal Contingency - Another common contingency attached to a purchase agreement is the Appraisal Contingency. This means the agreement is contingent upon a written appraisal by a licenses appraiser at no less than the specified purchase price. The purpose of this is to protect the buyer if it turns out the property is worth less than the purchase price, and by allowing the buyer to back out if the bank won't loan the full amount required by the contract because the value of the property is too low. 4.Home Sale/Settlement Contingency - A home sale contingency means that the purchaser of a property must sell and settle their property in order to purchase the new property. Usually a buyer will make this request if their current home is on the market and they need the funds from that settlement to have enough funds for settlement on their new home. A Settlement contingency means the property is already under contract and pending settlement. 5.Tenant Occupied Contingency â€“ When purchasing a property that is tenant occupied the buyer will want to include some sort of tenant occupied contingency which entitles him or her to review the current lease and give termination notice if appropriate. The lease is also needed to account for any prepaid rent or security deposit being held. If the lease is slated to end prior to settlement the buyer will want to include a special clause in the purchase contract stating that the property will be delivered vacant at settlement. Taking advantage of all of the home sale contingencies mentioned above will give the home buyer the best opportunity to gather information about the property before making a final decision whether or not to proceed with the home purchase.