When buying a home in San Diego, you know you are about to board or are currently on the real estate roller coaster until you hopefully close. From agreeing upon a sales prices, to dealing with contingencies, to loan approvals, and all the paperwork, it can be a long and arduous process and it isn’t for everybody! Today, we are going to look further at the contingencies that are included when buying a home in San Diego, and there are quite a few to sift through!
Contingencies? What are Those?
Contingecies are part of the real estate lingo that you need to know about if you are looking to buy or sell a home in San Diego. JVM Lending help us define contingencies as “. . . clauses written in real estate purchase agreements and contracts that give buyers a way to “back out” if they decide they no longer want to move forward with the purchase. Contingencies are very common in California real estate contracts. There are three types of contingencies that are the most common for California buyers. Contingency periods can last from 5 to 30 days, and once contingencies are removed, a buyer is obligated to buy the property.”
Contingencies are almost like a potential buyers safety net. It allows buyers to feel like they have options if they feel the deal just is not right for them. Of course, if you are a seller, working through the contingencies can be a nail biting and stressful experience because you are trying to get through each hurdle seamlessly. However, if you are trying to sell an outdated or distressed home, many times contingencies surrounding the issues in your home can be quite scary for a potential home buyer and oftentimes, the deal can be lost during the process. Most potential buyers are not comfortable with large and, not to mention, expensive repairs prior to purchasing the home.
Investopedia explains further that, “Contingency clauses can be written for nearly any need or concern. But in every case, if the conditions of the contingency clause are not met, the contract becomes null and void, and one party (most often the buyer) can back out without legal consequences.” On the flip side, that also means that if the conditions are met, you are now legally bound to the contract and cannot back out.
Inspection Contingency
Let’s get into the types of contingencies there are. One of the major contingencies when buying a home in San Diego, is the dreaded inspection contingency. Now the inspection contingency is also known as “due diligence contingency.” This gives the buyer a right to have a home inspection prior to purchasing the home. There are many types of inspections to choose to have. Most buyers will make sure that they have a full home inspection, pest inspection, septic inspection, roof inspection, A/C and furnace inspection, and even a chimney inspection. Once you have inspections booked, the inspector will come out to the property, inspect the home inside and outside depending on the type of inspection, they provide a very thorough report. This report lays out all of the issues with the home, big and small, and can be pages and pages long of issues.
Cedar Creek Realty lets us know that, “If you get an alarming inspection report on a home you’re buying or selling, don’t panic. Until you see the whole picture clearly, you’re not in a position to determine whether you have a major problem to deal with or not. Some inspections call for a “further inspection” if additional information is needed. If an inspection result is controversial, a second opinion can be sought.” Inspections of any kind are always a bit stressful, especially when you have a home that is not in tip top shape. When you are trying to sell your home that may be outdated, in need of repairs, or is distressed in any way, you are nervous to what any inspection report may find. And they will find the issues. In addition, if you are a potential buyer and find out the home you are looking to pour a huge portion of your financial means into has problems, this can be a huge RED FLAG and may have you second guessing the purchase in the first place.
Appraisal Contingency
The next contingency we are going to get into is the appraisal contingency. First, let’s figure out what an appraisal is exactly.
Progressive helps us understand, that, “The appraiser’s report will evaluate several things about the property, including:
- Size, layout, and any unique or desirable amenities
- Number of bedrooms and bathrooms
- Floor plan
- Recent sales data for similar properties in the area
The home appraisal process is a complete visual inspection of the house and will note any visible issues that may detract from its overall value. The appraisal report will include a visual sketch of the home’s exterior, a map indicating the exact location of the property, photographs of both the interior and exterior and any land records that may influence the home’s value.” This is where a a home inspection is quite different than an appraisal because the appraisal, as noted above, really focuses on what you can see (design, location, features of the house, size, etc.) The appraisal is less intensive and focuses on any flaws that may affect the home’s value.
Even though an appraisal is less intensive than a home inspection, it can still carry quite a bit of weight and stress when home buyers are waiting for the report. If you get the appraisal report back and it shows that the amount you offered is less or the same as the home’s value, the sale can move forward as scheduled and you can breath a sigh of relief. However, this isn’t always the case, especially in today’s competitive San Diego real estate market. If the appraised value is lower than the offer, this can really delay closing and slow down the process. Lenders aren’t really keen on on lending more than a property is worth. So when this happens, the buyer will have to make up the difference in cash or the deal can fall through. Many times buyers don’t have the cash in hand to make up the difference and well, you are back at square one.
Loan or Financing Contingencies
The last contingency we will look at today is the loan or financing contingencies. A loan contingency is put in place to protect buyers if they are unable to gain mortgage financing for any reason. Most home buyers in San Diego or California for that matter are pre-approved before they even go house hunting. However, a loan or financing contingency is still necessary to protect California buyers if their qualification is particularly tight or complex. If buyers make offers with no loan contingencies and they are unable to qualify for financing, they risk losing their earnest money deposit. Making sure you have a financing contingency allows the buyer to terminate the deal with no penalty if their financing doesn’t go through.
Waiving Contingencies
So now that you have gotten an overview of all of the contingencies involved when buying a home in San Diego, it can add stress to an already stressful situation. The most seamless and streamlined selling process is to use a cash buyer like Trusted House Buyers when selling your home. The biggest perk, we can offer you, is a fair cash offer and waive all contingencies. There are no home inspections to deal with, roof inspections, appraisals to worry about. We take your home in the condition that it is currently in and allow the seller to walk about from their home with cash in their pocket. After all, if you have a home that will not pass inspections and appraisals with flying colors, most likely the reality is that you will have a buyer that will become weary with the laundry list of problems and issues your house has. They may not be willing to see the deal through. This can be one of the most frustrating parts of selling a distressed home is that most buyers are not going to be able to stomach large issues, and it can mean getting close to the finish line, only to not have the contingencies removed and the sale dies. This leaves you back at square one with more time passing. Give Trusted House Buyers a call today at 619-786-0973 and let us help you avoid the ups and downs of contingencies, appraisals, inspections, and loan approvals. We can provide you cash for your home today. We look forward to working with you!
