inspections, etc. • The deed to be granted. • State-mandated legal requirements. • Attorney review of contract. • Any disclosures. • The time after which the offer will expire.
Something else to consider is contingencies. Many offers are made contingent upon a factor or event that must be resolved before the offer moves forward. The most common contingencies are home inspections, financing and appraised value. The offer can be made contingent upon a satisfactory home inspection report. If major physical damage is revealed during the home inspection, the deal could be called off. This shouldn’t be all that surprising, however. If a home is considered structurally unsound or unsafe to live in, then there’s a good chance the deal won’t move forward. For financing, the offer is made contingent on the buyer receiving a sufficient mortgage loan from their bank, or for current homeowners, contingent upon the sale of their home. Having as strong pre-approval or Mortgage Credit Approval Letter (MCAL) is the way to avoid having financing sink your deal. Appraisals that are lower than the purchase price do occur and can be deal breakers. If your target home’s appraisal is lower than the purchase price, this effects the loan-to-value (LTV). For example: you have agreed on a purchase price of $600,000. Your down payment is 20% ($120,000). The loan amount is $480,000 (80%). The appraised value comes in at $580,000. The lender will only provide 80% of the appraised value which in this case is $464,000. You can try to renegotiate the price based on the appraised value or if you are still willing to make the purchase at $600,000 you will have to make up the $16,000 difference.
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