Resolving Contingencies in Real Estate Closings
It is not uncommon for parties in a real estate contract to have to deal with issues that come in throughout the process. The contract identifies detailed dates and requirements in order for the sale to be finalized. If these are not met, the contract could be terminated.
On the other hand, contingencies can be resolved so that the sale can proceed to finalization. Here are some options to consider:
1. Extend Contingency Deadlines: The parties can negotiate to extend the deadlines for contingencies. This gives them more time to resolve any outstanding issues, such as a buyer selling their current home or securing a mortgage commitment, or a seller completing repairs identified in the inspection.
Obtain a Bridge Loan: If a buyer is struggling to sell their existing property, a bridge loan can provide short-term financing to facilitate the purchase of a new home, bypassing the sale contingency.
Release of Contingency: Sometimes time is of the essence and the parties may be willing to move forward with the purchase despite a contingency not being met. In this case, they can formally release the contingency. This may require negotiation or compromise on one party or the other.
Alternative Vendor Solutions: Sometimes there is a piece of the process that makes the numbers not work for you. Consider finding alternative vendors. If financing is the issue, buyers can explore alternative lending options, such as private lenders or different loan types, which may have more flexible requirements. Sometimes insurance companies will not insure or quote premiums that are intolerable. There are many mortgage brokers and insurance brokers in the industry. Do not hesitate to get other quotes; It is OK to keep calling until your needs are met.
Negotiate Repairs or Credits: If the contingency is related to repairs or inspections, buyers can negotiate to have the seller complete repairs or offer credits at closing to cover the cost, allowing the sale to proceed without the contingency holding it up.
Escrow Agreement – Occasionally, issues arise at the last minute. One option is to hold seller proceeds back with the buyer’s attorney until there is proof that the remaining contingencies are met. Often this arises when Inclusions/Exclusions are not met at the walk-through, or a lengthy repair remains pending.