A real estate transaction takes a long time to complete. The people selling real property could experience major setbacks if a transaction ends up delayed or canceled. They may have to relist the property, which might result in additional months of downtime between when they list the property and when it finally transfers to new owners.
Sellers are therefore relatively wary of the idea that people might cancel the closing after making an offer. Buyers usually propose a purchase and offer earnest money to establish their sincerity. Earnest money usually represents at least 1% of the sale price offered by the buyer. The funds apply towards the purchase provided that the buyers complete the transaction.
If they cancel, the sellers might be able to retain some or all of the earnest money. Making an offer can be a bit of a gamble for those who have a large amount of money on the line. Thankfully, there is a straightforward means of limiting the risk of losing earnest money.
Buyers can add contingencies to their offers
Crafting customized offer documents and negotiating appropriate terms for a purchase agreement can protect a buyer by limiting their financial exposure. They can include certain contingencies in their offer. If unusual circumstances arise, they may be able to cancel the closing without endangering their earnest money.
People often include financing contingencies in their offers. If circumstances change and they cannot obtain final approval for a mortgage, the financing contingency protects their earnest money. Appraisal contingencies are common as well. If the appraisal comes back too low, the buyer can cancel the closing or try renegotiating with the seller without risking their earnest money.
It’s also common for buyers to have inspection contingencies in place in case there are surprise issues with the property. The integration of the right contingencies and other key legal protections in real estate purchase offers can help buyers confidently navigate what is a complex and somewhat risky transaction.
Having help when crafting real estate transaction documents and reviewing paperwork before a closing can help buyers protect themselves. People who take steps to limit their risk can feel more confident about making a commitment to purchase a property.
