What do Contingencies Mean in a Real Estate Contract?

What do Contingencies Mean in a Real Estate Contract?

  When you are buying or selling a house, many contingencies can be written in the contract. What are they and what do contingencies mean? Let’s take a look at the five most common. Financing. Financing contingencies are the most common type of contingency. It is also the one that in almost all cases, does not get removed until the actual closing takes place, everyone has signed and the property changes ownership. It means that the lender or mortgage company has to fully approve and underwrite the loan and that if the loan is not approved for any reason, the Buyer can terminate the contract and receive their earnest/trust money back unless the contract accounts for it differently. Inspection. I always advise my Buyers to have the home inspected. Not only a general home inspection but if anything comes up on the inspection that may need to be evaluated further, specific contractors or professionals can also inspect those items. Radon, mold, and pest inspections can also be beneficial and can be part of the inspection contingency. Raw land may require other types of inspections and these are included as well. If the Buyer is not satisfied, for any reason, either with the findings, or the negotiations associated with the inspections, this contingency gives them a way out of buying the property. Appraisal. Appraisal contingencies keep buyers from overpaying for the property. Most contracts with appraisal contingencies in them allow the Buyer to terminate the agreement if the property does not appraise for at least the agreed to purchase price in the contract. As we discussed previously, the parties can negotiate if they want to move forward with executing the remainder of the contract but it does give the Buyer the right to walk away if they so choose. Sale of Home. This contingency can be used if a Buyer has another house they need or would like to sell prior to closing on a new one. Not all Sellers like to accept a home sale contingency – especially if the market is hot where they are but the market where the Buyer’s property is, isn’t. The contingency can be used if the Buyer’s property is currently on the market, is not currently on the market, or is already under contract, just waiting to close. Sellers should ask questions and perhaps make certain requirements of the Buyer if they choose to accept this type of contingency. Spousal approval. In a hot real estate market, it is necessary to move quickly in making an offer. If there is more than one Buyer but only one can make it to see the property, this contingency can be used. Typically, a Seller will...

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New Year – New House: 5 Tips for a Head Start

New Year – New House: 5 Tips for a Head Start

If a new house is on your list for the new year, here are five tips on getting a head start: Be ready with a list. Ask yourself some questions. Why are you moving? Why do you want a new house? Why do you need a new house? One you have the answers, make a list of wants, needs, and deal breakers. As you make this list, you may find that you move some things around while you’re making it. That’s fine. You may decide to refine it even after you’ve looked at some houses. Just try to get it as close to perfect before you start seriously looking to purchase. The most important column is the “deal breakers.” Houses have a way of being very shiny sometimes. Buyers may overlook the lack of a garage (deal breaker) because the backyard is landscaped so nicely (shiny) but when it’s 35 degrees and they’re not sitting in shorts in the backyard, they may kick themselves for not sticking to their list. Make sure you keep your list with you and don’t even go see houses that have any of those deal breakers. You’ll thank yourself later. Be ready with your finances. You may be looking at snow now, but Spring and Summer is just around the corner and the housing market will be in full swing. If your market is anything like mine in the Nashville area, you MUST either have cash or be pre-approved by a reputable mortgage lender. Not only do you need to make sure you have all your finances in order, so you don’t waste your time, you need to give yourself a leg up on the competition. The more you have saved for a down payment, the better. Also, don’t underestimate the power of a local, reputable lender. There are so many options for mortgages. There are plenty of good and plenty of bad. You may want to ask local Realtors who they think has the best reputation. When you are competing for a house with other pre-approved Buyers, having a pre-approval letter from a company that is known in the community to be reliable and not miss close dates may be just the thing that pushes the Seller to take your offer over someone else’s. Be ready with your time. Not only do you need to have your list and your finances, you have to have time. When a house comes on the market on Wednesday, you can’t wait until the weekend to set a time to see it. You need to make sure your current schedule will allow quick appointments. Be as flexible as possible. If you aren’t someone else will be and...

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Falling Temperatures and Falling Prices: 5 Tips for Selling Now

Falling Temperatures and Falling Prices: 5 Tips for Selling Now

  Last week it was in the 80’s. This week it’s in the 70’s and I’m driving with my windows down. Falling temperatures can often times mean falling home prices as well. We are seeing this currently in our market. Spring came early this year. We were seeing houses fly off the shelves starting in early March. That was great for the intense Spring/Summer market we had but now that schools are back in session, and the temperature is falling, we are seeing a bit of a slow down as well as falling prices. Over the summer, I didn’t see many price reductions. Buyers were buying whatever went on the market, within reason. They knew that if they didn’t scoop it up, someone else would and Sellers knew they could get by with pricing it high because it was going to sell. Unfortunately, there are still those Sellers who didn’t get in the market a few months ago and they have heard about how much houses sold for in their neighborhood or how much money their friend made on their house and they think they can do the same thing. In some cases they can, however, Buyers in the market this time of year, typically aren’t as “desperate” to get into a house by a certain time so they take their time, and they hold on to more of their money. Sellers need to make sure they are realistic with their pricing and their expectations. Sales typically take a little longer than they do in the warmer time of year. They also can see that the Buyers aren’t as eager to pay top dollar for their house like the guy that bought the house next door. There are always exceptions, of course, but generally, Sellers will need to have a little more patience and be a bit more negotiable now.   Tips for selling in falling temperatures: Hire a Realtor or make sure you know the exact recent sales price of homes around you. Word of mouth is NOT the best way to price your house. Just because your neighbor said the guy down the street sold his house for “x” doesn’t mean he had all the information. What kind of financing, if any, was there? Were there any Seller concessions and what kind of repairs did the Seller have to make prior to closing? Just because a house in your area sold for “x” back in February, doesn’t mean you can sell yours for that or more. Appraisers like to use comparable sales within 3 months time. If they need to stretch it, they will go back 6 months but if there are other comparable sales that are...

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Hot Potato

Hot Potato

  I might be aging myself, but, did you ever play “Hot Potato” as a kid? You know the song, “One potato, two potatoes, three potatoes, four, five potatoes, six potatoes, seven potatoes, MORE!” You would pass an object around a circle as you chanted the words and the one holding the “potato” when you yelled “more” was out. Everyone wanted to get that object around as fast as they could – almost frenzy-like. Emotions could run high in a competitive game of “Hot Potato”. Some kids got mad, some kids were sad, and some kids were downright mean. That’s how I feel about the real estate market sometimes. In a hot market like the Nashville area has experienced for some time now, some people get a bit frenzied. They have been caught with the hot potato more than once and have yet to get an accepted offer. I’ve had people yell, cry, and others get downright mean…hmm…reminds me of elementary school. Now, before you think me callous, I know it’s stressful. I know emotions are heightened. I understand that for some, they have to find a place to live – and pronto. These are the things that a great Realtor helps you prepare for. Sometimes, we just need to chill out for a second, calm down, and breathe. I bet most of us have friends or family that would let us crash at their place if we were in a bind. In my experience, when we get frenzied, things go awry. Details get missed, poor decisions are made, and that results in more stress. In hot markets it’s easy to lose perspective, but do what you can to stay focused on the result you want and being patient until it’s right. Don’t get caught up in emotion that can cause more turmoil in the end. Hire professionals and trust them and if you get caught with the hot potato, pick yourself up, dust yourself off, and get back in the...

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7 Topics to Discuss When Interviewing a Property Manager

7 Topics to Discuss When Interviewing a Property Manager

    If you are an investor or would like to be, you may decide that the late night phone calls from tenants who have clogged their toilet is not something you want to handle. In that case, you will want to hire a Property Manager. It is a good idea to interview the company or person and make sure they meet your needs. Here are some tips on some things to discuss: About the Company: How long have you been in business in this area? Are you licensed? Are you a full-time property manager? How many properties do you manage? Do you have assistants? Do you have a contract and references? Fees: Management, Leasing and Re-Leasing fees? Advertising and Showings? Inspections and Evictions? Late Fees? Hidden fees? Cancellation fees? Communication: Do you have a direct phone number: Do you have a direct email address? Do you have software that allows for communication? Do you have an office location? Advertising: How do you advertise? Do you have yard signs? Are you open or available on weekends? Can you show me a sample of a “For Rent” ad? Do you advertise and/or show property when it is occupied? Maintenance: How do you handle maintenance? Do you have a list of preferred vendors? Do you have an emergency “after hours” line? Do you require a maintenance reserve? Accounting: Do you provide monthly and yearly statements? Do you pay vendor bills for owners? When and How do owners get paid? Do you have a policy for monthly spending limits and/or approval? Property Protection: How do you screen applicants? Has your lease been reviewed by a real estate attorney? Do you have move-in/vacate checklists? How often do you inspect the property? How does your eviction process work? Oxford Property Management is a locally owned management company in the Middle Tennessee area. They provide residential rental management services to property owners and investors and handle property advertising, tenant screening, lease signing, managing funds from security deposits and rent, property maintenance, financial accounting/reporting, and tenant removal and collections, if necessary. They offer low leasing fees, a tiered management fee structure that starts lower than average management companies and decreases with additional properties under management, and an in-house maintenance department to control repair costs. I have many clients and friends that use Oxford’s services and they all highly recommend them. Their website is: www.oxford-tn.com or you can reach them by phone at...

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Start to Finish

Start to Finish

  Is it just me? Lately I have felt that most people in this world just try to get by with doing the very least. Take your car to get it washed, spend good money, and try not to find something that they missed. Go to a store and get friendly, customized service, huh? Go to a drive thru window and get everything you asked for, and then some, without having to check – not typical. Some things are just human error, I get it. But others seem to be because of pure laziness. I bet in your career, business, school, life, you see it every day. People that you have to watch out for. People you know that when you are in contact with them, you will have to pick up their slack. Why do we have to do this? Why are there so few people who actually do a job – start to finish – and do it well? At first glance we may think people are lazy but I think there may be some underlying reasons. We are TIRED! People are exhausted. We are so busy and have so many commitments that we can’t possibly give our all to everything. The same reason why a lawyer can’t represent the plaintiff and the defendant is the same reason (go with me here) that we can’t spread ourselves too thin. We can’t be everything to everyone. Focus on one or two things that either make you better, make you money, or make you happy and put your energy into them. Once you have them under control, you can add more to your schedule, just be careful not to take on too much. We are UNEDUCATED. So many of us don’t realize that what we are doing or not doing will affect how we are perceived and could affect our future. No doubt, you’ve heard of an executive being waited on by an attentive server who goes above and beyond to make sure the experience is enjoyable who finds themselves being offered a high paying job because they took the time to do their job well. If we are educated to the fact that everything we do has consequences, we may conduct ourselves differently. We are not INVESTED. Sometimes we take on things we shouldn’t because we see a need and we think we should step up even if we are not completely qualified. Don’t get me wrong, sometimes that little voice inside is there to tell us to take risks but other times it is just us feeling like we can’t say no. We are dead wrong. What’s worse than saying, “no?” Saying, “yes” and not being invested....

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