Contingencies: Essential Safeguards for Savvy Buyers

Buying a home while still owning another presents a complex dilemma. Homebuyers must decide whether to sell first, risking temporary housing challenges, or buy first, potentially managing two mortgages.

Many opt for a real estate contingency, a contractual protection allowing purchases only if the current property sells. This strategy safeguards buyers from financial strain but can hinder competitiveness in a market where sellers favor offers without such conditions. To strengthen their position, buyers may provide proof that their home is under contract or in escrow.

Arizona law offers multiple exit options for buyers beyond home sale contingencies. The inspection period is paramount. Under the standard Realtor Residential Purchase Contract, buyers typically have 10 days to conduct various inspections, including general assessments and specialized evaluations like termite examinations or pool inspections.

Should issues arise during inspections, buyers can request repairs or concessions. The seller has five days to respond, either accepting the requests, proposing alternatives, or declining to make repairs. If the seller does not respond within that timeframe, buyers have an additional five days to decide whether to proceed or cancel the contract and retrieve their earnest money deposit.

Financing contingencies are also critical in real estate transactions. Buyers needing a mortgage often include a financing contingency that allows them to exit the contract if they cannot secure a loan. Lenders usually require property appraisals unless the buyer puts down more than 20%. If a home appraises below the purchase price, the appraisal contingency lets buyers renegotiate the price or withdraw from the deal.

Title and homeowners’ association (HOA) contingencies provide additional protections. Sellers must present a title commitment, revealing any liens or legal restrictions. Significant concerns allow buyers to withdraw. For properties within HOAs, sellers must provide disclosure documents, giving buyers five days to review and cancel if the terms are unsatisfactory.

For sellers, the contract offers no contingencies. Their only option for withdrawal is if the buyer breaches the contract.

Consulting with an experienced real estate professional can help navigate these complexities. Strategic negotiation and expert guidance can greatly influence whether a buyer secures their ideal home or misses out.

Dayv Morgan is a realtor based in Maricopa and the owner of HomeSmart Premier.