Page 15 - Boca Club News - January '22
P. 15

Boca Club News, Page 15
      Legal: Contract Contingencies

      By Michael J Posner, Esq., a partner               almost all As-Is Purchases. In exchange for accepting the   is $500,000, an appraisal of $450,000 would mean that a
      in Ward, Damon, Posner, Pheterson                  property as-is, the buyer is able to obtain an inspection   buyer has to put down an additional $40,000 to fund the
      & Bleau, P.L. a mid-sized real                     and, during the inspection period, cancel the contract due   shortfall. If you are waiving the contingency this factor
      estate and business-oriented law                   to the results of said inspection (or for any other reason   must be considered.
      firm  serving  all  of  South  Florida,            in buyer’s sole discretion). Traditionally, there were not      In addition, I recommend that a provision be added
      with  three  offices  in  Palm  Beach              inspection contingencies in real estate contracts. Instead,   to the contract that states that the buyer’s appraiser will
      County. They specialize in real                    buyers would obtain an inspection and the seller would be   have access to the property during the term of the contract,
      estate law and can assist sellers                  obligated to make repairs found in the inspection report   as we have seen sellers refusing to provide access under
      and purchaser with closing and                     to a financial cap of 2-3%, and if the cap was exceeded   contracts that are “cash transactions.”
      financing of residential and commercial real estate.   either the buyer or seller could cancel the contract.      Title Contingency: Sellers must provide marketable
      They can be reached at (561) 594-1452 or at mjposner@     In today’s competitive market, sellers are either   title to prospective buyers in order to close on the sale.                                      offering short inspection periods of 7 to 10 days instead of   This means that any title defects must be corrected in order
         The real estate market in South Florida, as well as   the traditional 15-day inspection period, or even waiving   for this contingency to be waived. This includes payment
      across  the  United  States,  continues  to  be  extremely   inspections  altogether. While  sellers  are  obligated  to   of all mortgages and past due taxes, and compliance with
      volatile, with high demand and low supply. I personally   disclose known material defects in condition that would   all code enforcement and Association liens, assessments,
      have been looking to find a second home in Fort Myers for   affect the value of the property, closing without an   and violations. If a defect in title prevents the seller from
      over nine months and have been frustrated by the limited   inspection is extremely risky as there could be many minor   being able to close, the standard contract gives the seller
      number of houses available to consider in our price range   defects which, in and among themselves, would not affect   an additional thirty days after the closing date to cure the
      and with our specific needs.                       value but could collectively cost substantial sums to repair.   defect. If the defect cannot be cured, the buyer has the
         We finally located a house that we would consider, but   Shorter inspection periods may result in the inability to   right to terminate the contract and receive the return of
      it was both over our budget and missing certain features,   obtain a quality inspection due to the limited availability   the buyer’s deposit.
      such as a swimming pool and hurricane protection. We felt   of inspectors at any given time.            Understanding contractual contingencies and the risk
      that if we could get price concessions, we could always      Financing Contingency: In my own purchase, I knew   of  waiving  any  contingency  is  crucial  in  this  difficult
      add the additional items even though that would, of course,   that the seller would not consent to a financing contingency.   buyer’s market. No contingency should be waived
      push the expense of the house even higher. With no other   The standard financing contingency gives the buyer thirty   without planning and understanding of the risks involved.
      houses available, we decided to take the plunge and make   days to obtain approval for a mortgage loan. Approval is   Otherwise, a buyer could end up losing the deposit or
      an offer on the house and hope that the buyer would come   based on a number of factors including the buyer’s down   buying a property with substantial imperfections or title
      down enough to make it worthwhile for us to purchase.  payment amount, source of funds, income, credit score   defects that will cost the buyer substantial sums to cure.
         After our first contract offer was rejected, we received   and the appraised value of the property. Any one of these
      feedback from the seller that certain contingencies would   factors can cause a lender to deny a loan to a buyer. If
      not be accepted as part of any offer. They told us that   the lender denies the loan, the buyer may terminate the   Advertise,
      they had entered into two contracts for the home, both of   contract and receive the return of their deposit.
      which had been canceled due to contractual contingencies.      Waiving  the  financing  contingency  does  not  mean
      Therefore, they would not accept any offer with any   that a buyer cannot obtain a mortgage loan to purchase   Check out our website!
      contingencies other than a short inspection contingency.  the property. It simply means that the contract is not
         A contingency is any contractual agreement that makes   contingent on the buyer obtaining financing, and if the
      proceeding by buyer or seller under a contract contingent   loan is denied the buyer is still obligated to close or risk
      on a future event. There are both common and unusual   losing their deposit. Assuming a buyer is comfortable
      contingencies in real estate contracts. The most common   on their ability to obtain a mortgage loan based on their   or call 746-3244.
      contingencies are described below, but many other   income and credit (or willing to pay cash if necessary),
      contingencies can be agreed to, and we will explore those   the only risk to waiving the financing contingency is the
      in my next column.                                 appraised value of the property. For example, if a buyer is        :
         Inspection Contingency:  Today’s contracts are   financing 80% of a home’s value, and the purchase price

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