Claudia Backus, MBA

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Tag: Real Estate Contingencies

  • What Is a Contingency in a Real Estate Offer? What California Home Sellers Should Understand

    What Is a Contingency in a Real Estate Offer? What California Home Sellers Should Understand

    Receiving an offer on your home can be exciting, especially when the price looks good. It is natural for a seller’s attention to go immediately to that number, but the purchase price is only one part of an offer.

    The terms of the offer matter too, and contingencies are among the terms sellers should understand before deciding how strong an offer really is.

    A contingency generally gives a buyer the ability to move forward with the purchase subject to certain conditions. Depending on the terms of the contract, those conditions may involve the buyer’s investigation of the property, financing, an appraisal, or other circumstances addressed in the agreement.

    For a seller, understanding those contingencies can make it easier to evaluate an offer as a whole rather than looking at the purchase price alone.

    Why Contingencies Matter to a Seller

    When a seller accepts an offer, the transaction begins moving toward closing, but that does not necessarily mean every uncertainty has disappeared.

    A buyer may still have important steps to complete during the transaction. The buyer may investigate the condition of the property, work with a lender to obtain financing, or have the property appraised.

    The specific rights and obligations of the parties depend on the contract they sign, which is why sellers should pay attention not only to whether an offer contains contingencies, but also to what those contingencies actually say and how much time is provided for them.

    An offer with a higher price is not automatically the strongest offer if other terms create substantially more uncertainty for the seller.

    An Investigation Contingency Can Give the Buyer Time to Learn More About the Property

    Buying a home is a significant financial decision, and buyers commonly want an opportunity to investigate the property.

    Depending on the transaction and the contract, this period may involve inspections or other investigations that help the buyer learn more about the home’s condition.

    Sellers sometimes hear the word inspection and assume the purpose is simply to create a list of repairs. In reality, the investigation period can be much broader. It gives a buyer an opportunity to gather information about the property and make decisions based on what is discovered, subject to the terms of the agreement.

    For the seller, the important point is to understand what the contract allows, the applicable deadlines, and what may happen if an issue is discovered.

    Financing Is Another Important Part of an Offer

    When a buyer is obtaining a loan to purchase the property, financing can be an important part of the transaction.

    A buyer may appear financially strong and may even have a lender’s preapproval, but a preapproval is not the same as a completed loan. The lender may still need to review documents, verify information, evaluate the property, and complete its underwriting process.

    This is one reason sellers should look beyond the offer price and consider the buyer’s financing terms as part of the overall offer.

    The amount of the down payment, the type of financing, the contingency terms, and the time provided for the buyer to complete certain steps can all be relevant when evaluating the transaction.

    The Appraisal Can Matter When Financing Is Involved

    An appraisal is another part of many financed real estate transactions.

    The lender generally wants an independent opinion of the property’s value because the property is being used as security for the loan. If the appraisal supports the purchase price, this part of the process may proceed without much attention from the seller.

    If the appraised value comes in below the purchase price, however, the situation can become more complicated.

    What happens next depends on the contract, the financing, and the decisions made by the parties. The buyer and seller may need to consider their options based on the specific circumstances of the transaction.

    This is another example of why the highest purchase price on paper does not tell the entire story.

    Fewer Contingencies Do Not Automatically Mean the Best Offer

    From a seller’s perspective, an offer with fewer uncertainties may initially appear more attractive. However, it is important not to evaluate an offer based on one term alone.

    Purchase price, financing, deposit, contingency periods, closing date, possession, and other terms can all contribute to the overall strength of an offer.

    The seller’s priorities matter as well.

    A seller who needs a particular closing date may evaluate two offers differently from a seller whose primary goal is maximizing price. Another seller may place greater importance on the likelihood of the transaction reaching closing without unnecessary complications.

    There is no universal formula that identifies the best offer for every homeowner.

    Real estate appraiser evaluating the exterior of a Los Angeles home as part of the home purchase process.
    An appraisal can be an important part of a financed home purchase because the lender generally wants an independent opinion of the property’s value.

    Pay Attention to the Deadlines

    Real estate contracts contain important dates and deadlines, and contingency periods can be among them.

    Once an offer is accepted, both buyers and sellers should understand what is expected during the transaction and when certain actions are supposed to occur.

    A seller does not need to memorize every provision of a real estate contract before putting a home on the market. However, when an offer arrives, it is worth slowing down enough to understand the terms before making a decision.

    A purchase agreement is a contract, not simply a statement of how much someone is willing to pay for the house.

    Look at the Entire Offer Before Making a Decision

    It can be tempting to compare offers by putting the prices next to each other and choosing the largest number. In reality, evaluating an offer requires a more complete picture.

    The price matters, but so do the contingencies, financing, timelines, deposit, closing terms, and the seller’s own priorities.

    Understanding those pieces does not mean a seller needs to become an expert in real estate contracts. It means asking questions and understanding what is being agreed to before signing.

    When an offer arrives, the goal should not simply be to find the highest number. It should be to understand the entire offer and make an informed decision about which terms make the most sense for the seller and the property.

    With gratitude and a heart for service,

    Claudia Backus, MBA
    California Real Estate Broker
    REALTOR®
    Serving Pacific Palisades & the Westside of Los Angeles

  • What Happens After You Accept an Offer on Your Home? A Guide for California Sellers

    What Happens After You Accept an Offer on Your Home? A Guide for California Sellers

    What Happens After You Accept an Offer on Your Home? A Guide for California Sellers

    Receiving an offer on your home can be exciting, and accepting one can feel like a major milestone. But for a seller, an accepted offer is not the end of the process. In many ways, it begins the next important stage of the transaction.

    Once a home is under contract, there are still several steps that may need to happen before the sale closes. Depending on the terms of the agreement, these can include the buyer’s deposit, inspections, disclosures, an appraisal, financing, contingency periods, requests for repairs or credits, and the final steps leading to closing.

    Understanding what may happen after accepting an offer can help sellers feel more prepared and make better decisions throughout the transaction.

    The Purchase Agreement Becomes Your Road Map

    Once an offer has been accepted and a contract has been formed, the purchase agreement becomes an important road map for the transaction.

    The agreement establishes the price and other terms the buyer and seller have agreed upon. It can also include important deadlines and contingency provisions.

    This is why I believe sellers should look beyond the purchase price when reviewing an offer. Two buyers offering the same amount of money may be proposing very different terms.

    Before accepting an offer, it is important to understand not only what the buyer is offering to pay, but also what the agreement will require from both sides after acceptance.

    The Buyer’s Deposit

    The purchase agreement may require the buyer to place an initial deposit into escrow within the time specified in the contract.

    Sellers sometimes hear the phrase earnest money deposit used to describe this money. The deposit demonstrates the buyer’s commitment to the transaction, but its treatment is governed by the purchase agreement and applicable California law.

    A seller should not assume that accepting an offer means the deposit immediately belongs to the seller if the transaction does not close. What happens to a deposit can depend on the circumstances, the contract, contingencies, and other legal considerations.

    This is one of the reasons the details of the purchase agreement matter so much.

    Home inspection taking place at a Los Angeles area house after a seller accepts a buyer's offer
    After an offer is accepted, a home inspection can help buyers learn more about the property and may lead to additional questions or discussions before closing.

    Inspections May Bring New Questions

    If the buyer has an investigation or inspection contingency, the period after acceptance may include inspections of the property.

    A general home inspection is common, but depending on the property and the buyer’s concerns, additional inspections may also be requested.

    An inspection does not necessarily mean something is wrong with the house. Buyers use inspections to learn more about the property they are purchasing.

    The results, however, can lead to additional conversations.

    A buyer may accept the property as it is, request repairs, ask for a credit, seek a price adjustment, request additional information, or exercise rights available under the contract.

    A request from a buyer does not automatically mean a seller must agree to it. The response will depend on the purchase agreement, the circumstances, and what the seller believes is appropriate.

    The Appraisal Can Matter When the Buyer Is Financing

    When a buyer is obtaining a mortgage, the lender may require an appraisal.

    The appraiser provides an opinion of the property’s value for the lender. This is different from the home inspection, which focuses primarily on the property’s physical condition.

    If the property appraises at or above the amount needed for the buyer’s financing, this part of the transaction may proceed without much discussion.

    If the appraisal comes in lower than expected, the situation can become more complicated. What happens next depends on the contract, including whether the buyer has an appraisal contingency, as well as the buyer’s financing and the decisions made by the parties.

    This is another example of why the strongest offer is not always determined by price alone.

    The Buyer’s Loan Continues Through the Process

    A buyer who has been preapproved for financing still has work to complete after the offer is accepted.

    The lender may continue reviewing the buyer’s income, assets, credit, employment, property information, appraisal, and other documentation before giving final loan approval.

    From a seller’s perspective, this is why the financial strength of an offer can be important when evaluating buyers.

    A preapproval can provide useful information, but it is not the same as a guarantee that a loan will ultimately fund.

    Contingencies and Deadlines Matter

    Contingencies are an important part of many residential purchase agreements.

    Depending on the contract, a buyer may have contingencies related to investigations, an appraisal, financing, or other matters. The specific rights and deadlines depend on the actual agreement.

    Sellers should understand which contingencies are included in the accepted offer and the time periods associated with them.

    As the transaction progresses, there may be points when the buyer is asked to remove certain contingencies in accordance with the contract.

    Rather than focusing only on the anticipated closing date, I think sellers benefit from understanding the smaller contractual milestones that occur along the way.

    What Happens If the Buyer Requests Repairs?

    After inspections, sellers sometimes receive a request for repairs or other concessions.

    This can make homeowners nervous, particularly if they believed the price had already been fully negotiated.

    In reality, an inspection period can create another point of discussion between the parties.

    The buyer may identify items that were not obvious when the offer was written. The seller then needs to evaluate the request and decide how to respond based on the contract and circumstances.

    There is no universal answer to every repair request. The condition of the property, the nature of the issue, the strength of the transaction, other available options, and the seller’s priorities can all matter.

    The goal should be to make a thoughtful decision rather than reacting emotionally to the request.

    Preparing for the Final Days Before Closing

    As the transaction moves toward closing, escrow and the professionals involved in the transaction coordinate the documents and requirements necessary to complete the sale.

    The buyer may conduct a final verification of the property’s condition before closing, subject to the terms of the agreement.

    Sellers should also make sure they understand when they are expected to move out, what condition the property should be left in, which items are included in the sale, and when possession will transfer.

    These details are worth discussing well before the final day.

    Closing and the Transfer of Ownership

    In California, signing documents is an important step, but signing alone does not necessarily mean the sale has officially closed.

    The transaction generally reaches closing when the required funds and documents have been handled and the deed transferring ownership is recorded with the county.

    Once the transaction closes, the seller receives the proceeds due to them through escrow after applicable loans, costs, commissions, taxes, or other amounts associated with the transaction have been accounted for.

    The exact timing and details depend on the individual transaction.

    An Accepted Offer Is an Important Beginning

    Selling a home involves much more than finding someone willing to buy it.

    The period between accepting an offer and closing is where many of the details of the transaction are worked through. Inspections, financing, appraisal, contingencies, disclosures, escrow, and contractual deadlines can all play a role.

    Knowing this before you list can also help you evaluate offers more thoughtfully when they arrive.

    If you are considering selling a home in Pacific Palisades, Santa Monica, or elsewhere on the Westside of Los Angeles, I would be happy to walk you through the process from preparing the property and reviewing the MLS data to evaluating offers and understanding what happens after your home goes under contract.

    My goal is for sellers to understand not only what they are signing, but what comes next.

    With gratitude and a heart for service,

    Claudia Backus, MBA
    California Real Estate Broker | REALTOR®
    Serving Pacific Palisades & the Westside of Los Angeles