In the context of a house sale, “contingent” typically means that the sale of the house is dependent on certain conditions being met. These conditions could include things like the buyer securing financing, the completion of a home inspection, or the sale of the buyer’s current home.
For example, if a buyer makes an offer on a house and the offer is accepted by the seller, the sale may be contingent on the buyer obtaining financing within a specified period of time. If the buyer is unable to obtain financing, the sale may fall through.
Another common contingency is a home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal altogether.
Contingencies are designed to protect both the buyer and seller in a real estate transaction. They give the buyer an opportunity to ensure that the house is in good condition and that they can obtain financing, while also giving the seller some assurance that the sale will go through if the conditions are met.
Types of Home Contingencies
There are several types of contingencies that can be included in a home sale contract. Here are some of the most common.
Financing contingency: This contingency specifies that the sale of the home is contingent on the buyer obtaining financing. If the buyer is unable to secure financing within a specified timeframe, the contract may be voided.
Appraisal contingency: This contingency specifies that the sale of the home is contingent on the home appraising for at least the purchase price. If the appraisal comes in lower than the purchase price, the buyer may have the option to renegotiate the price or back out of the deal.
Inspection contingency: This contingency specifies that the sale of the home is contingent on a satisfactory home inspection. If the inspection reveals significant issues with the property, the buyer may have the option to renegotiate the terms of the sale or back out of the deal.
Sale contingency: This contingency specifies that the sale of the home is contingent on the buyer selling their current home within a specified timeframe. If the buyer is unable to sell their current home, the contract may be voided.
Title contingency: This contingency specifies that the sale of the home is contingent on the seller having clear title to the property. If there are issues with the title, the contract may be voided or the seller may need to take steps to clear the title before the sale can proceed.
It’s important to note that contingencies can vary depending on the specifics of the contract and the state or region where the sale is taking place. It’s always a good idea to consult with a real estate professional or attorney to ensure that your contract includes the appropriate contingencies for your situation.
When buying or selling a property, one crucial step in the process is obtaining an appraisal to determine its value. Appraisals provide an objective assessment of a property’s worth, influencing important decisions such as mortgage approvals, negotiations, and even insurance premiums.
However, there are instances when the appraisal falls short, causing challenges and uncertainties for both buyers and sellers. In this blog post, we will explore what to do when faced with an insufficient property appraisal and provide some practical steps to navigate this situation.
Understand the Appraisal Process:
Appraisals are typically conducted by licensed professionals who evaluate various factors, such as the property’s condition, location, comparable sales, and market trends. Appraisers use these factors to determine an accurate value for the property.
Review the Appraisal Report:
When you receive the appraisal report and find it insufficient, take the time to thoroughly review it. Look for any errors or discrepancies that may have influenced the final value. Understanding the appraisal’s weaknesses will help you determine your next steps.
Communicate with the Appraiser:
If you spot errors or discrepancies in the appraisal report, it’s crucial to reach out to the appraiser to discuss your concerns. It’s possible that the appraiser overlooked certain aspects or made mistakes that can be rectified through communication.
Gather Additional Evidence:
If you believe the appraisal is still inaccurate after discussing it with the appraiser, gather additional evidence to support your claim. This evidence may include recent comparable sales, property improvements, or any unique features that were overlooked in the initial appraisal. Presenting a compelling case with strong supporting data increases the chances of obtaining a revised appraisal.
Request a Reappraisal:
In some cases, when the appraisal falls significantly short, you can request a reappraisal from the lender. This request should be accompanied by the additional evidence you have gathered. Some lenders may consider a second appraisal if you can demonstrate valid reasons for your request. However, note that not all lenders will agree to a reappraisal, and their policies may vary.
Renegotiate or Seek Alternative Financing:
If a reappraisal is not an option or doesn’t yield satisfactory results, you may need to consider renegotiating the terms of the transaction. Discuss the situation with the other party involved, whether it’s the buyer or seller, and explore alternatives such as adjusting the purchase price or exploring different financing options.
While an insufficient property appraisal can be frustrating and present challenges, it’s important to approach the situation calmly and rationally. Review the appraisal report, communicate with the appraiser, gather additional evidence, and explore options like reappraisal or renegotiation. By taking proactive steps and maintaining open lines of communication, you can navigate through the process and work towards a satisfactory resolution.
Remember, real estate transactions often involve multiple parties, and finding a mutually beneficial solution is key to moving forward successfully.
A home appraisal is an assessment of the value of a residential property conducted by a licensed appraiser. The purpose of a home appraisal is to provide an unbiased and objective estimate of the property’s worth based on factors such as its location, size, condition, and comparable sales in the area.
During a home appraisal, the appraiser will typically conduct a physical inspection of the property, taking note of its features, condition, and any upgrades or improvements that have been made. They will also research the local real estate market to identify recent sales of similar properties in the area, which can be used as comparable in determining the property’s value.
The resulting appraisal report will typically include a description of the property, an analysis of its value based on the appraiser’s findings, and an explanation of how the appraiser arrived at their valuation. Home appraisals are typically required by lenders when a borrower is applying for a mortgage, as they provide assurance that the property is worth the amount being borrowed.
When Do You Need To Get An Appraisal?
There are several situations in which you might need a home appraisal:
When buying or selling a home: If you are buying or selling a home, an appraisal can help you determine a fair price for the property. For sellers, an appraisal can help ensure that the asking price is reasonable and attractive to potential buyers. For buyers, an appraisal can help ensure that they are not overpaying for the property.
When refinancing a mortgage: If you are refinancing your mortgage, your lender will likely require an appraisal to determine the current value of the property. This will help the lender determine the loan-to-value ratio (LTV) and the amount of equity you have in the property.
When applying for a home equity loan or line of credit: If you are applying for a home equity loan or line of credit, your lender may require an appraisal to determine the current value of the property and the amount of equity you have.
When settling an estate: If you inherit a property or are involved in settling an estate, an appraisal can help determine the value of the property for tax or inheritance purposes.
When disputing property taxes: If you believe that your property taxes are too high, you may be able to dispute them by providing evidence of a lower property value through an appraisal.
Overall, a home appraisal can be useful in any situation where the value of a property needs to be determined.
If you are applying for a home loan of any kind, there is a high likelihood that your lender will require a home appraisal. An appraisal is done to figure out how much your home is actually worth because the lender does not want to lend you more money than you could theoretically sell the home for in the future. There are some situations where the lender might be fine with a drive/by appraisal. What does this mean?
Comparing A Traditional Appraisal To A Drive By Appraisal
A traditional appraisal is a very thorough process where the appraiser comes to the home and inspects almost every portion of the home. This includes the interior and exterior. Then, the appraiser uses the information to calculate an estimate of the value of the home.
In a drive-by appraisal, the appraiser will only look at the exterior of the home. Then, the appraiser will compare this to the exterior of similar homes in your area, such as in your neighborhood, to get a better idea of how the value of your home compares to similar homes near you. Then, the appraiser uses this to figure out the value of your home.
When Is A Drive By Appraisal Permitted?
Ultimately, a drive-by appraisal is permitted at the discretion of the lender. Typically, if you are applying for a new home loan, the lender will want a full appraisal; however, due to the pandemic, some lenders have become more lax and have been allowing drive-by appraisals for safety purposes. In addition, if you are applying for a refinance, the lender might not require a full appraisal. This is likely dependent on the time between your original home loan and the current refinance. It might also be dependent on your financial situation.
Do I Want A Drive-By Appraisal?
There are a few advantages to you if the lender allows a drive-by appraisal. The process is usually faster, so it could help you expedite the closing process. In addition, if someone occupies the home currently, a stranger doesn’t have to enter the home to inspect every nook and cranny. If your lender requires a home appraisal, be sure to clarify what type of appraisal has to be done to get you to the closing table.
The vast majority of people will need to go through a mortgage lender when purchasing a home. One of the last steps in the purchase process is the home appraisal. The lender wants to make sure they are not lending more money than the house is worth. If the appraisal value comes in above what the buyer is paying, then the buyer is happy because they might be getting a great deal. On the other hand, if the appraisal comes in below what the buyer is paying, this can be frustrating. What is the appraisal gap, and how does it work?
Buyers Might Be Asked To Bring More Cash Or Pay PMI
In many situations, buyers will be asked to pay PMI if they are not putting 20 percent down. For example, if someone is buying a $250,000 house, they might be asked to put down $50,000 to avoid dealing with PMI.
Ultimately, if the lender is financing more than 80 percent of the loan’s value, PMI might be required. In the example above, if the house only appraises for $200,000, then the lender will only finance $160,000 before asking for PMI. Therefore, to get the lender down to $160,000, the buyer would have to bring another $40,000 to the closing table (for a total of $90,000 down) to avoid paying PMI.
If the buyer is not willing to pay PMI or close the gap, the sale could fall through, leading to other ramifications.
Get An Accurate Valuation Before Making An Offer On A House
If there is an appraisal gap, it can be frustrating for a buyer who is asked to bring more cash to the table. Furthermore, if the sale falls through, the buyer could lose his or her earnest money. Depending on the market, earnest money could be tens of thousands of dollars. That is why it is important to get an accurate valuation of the house before making an offer. No matter how beautiful the house might seem, it is important not to overpay, as it increases the chances of dealing with an appraisal gap. If there is an appraisal gap, buyers need to carefully evaluate their options before they decide how to proceed.