Your first real estate purchase in Boston is both exciting and complicated. Many first-time home buyers get lost in the excitement of viewing homes for sale in Boston. In order to avoid regretting a decision, it is important to be well informed. Contingent liabilities are an important part of this process that any potential buyer should be aware of. These requirements must be met for the purchase contract to become binding and the transaction to be carried out. Contingent liabilities provide buyers with a safety net, allowing them, under certain conditions, to renegotiate or even cancel a transaction without losing their deposit.
Here are 10 of the most common contingencies you should know about to give you the knowledge you need to protect your interests. Most importantly, even if you don’t use these tips, you’ll make more informed decisions on your journey to owning your dream home in Boston.
1. Funding Requirements
A financing requirement allows the buyer to end the contract on a Boston home for sale without penalty if you are unable to mortgage the property. The usual period for an unforeseen financing is 30 to 60 days. This is the period after the buyer has received pre-approval but before the bank makes a commitment. During the 30 to 60 day period, the bank will collect additional documentation from the buyer to ensure they qualify and other information about the property, including a valuation. If the buyer is unable to obtain the mortgage after this period, the full deposit will be returned. As with any contingent liability, the buyer and seller must agree to the terms of the contingent liability at the bidding stage.
2. Any home inspections
Because of this contingency, a certified third-party inspector will conduct a detailed inspection to ensure that any structural or systemic issues with your prospective Boston real estate purchase (e.g., electrical wiring, plumbing) are fully described and disclosed. In fact, a dream home can quickly turn into a financial nightmare when the core foundation and systems require major repairs or a complete replacement. An emergency home inspection ensures your investment is safe by allowing you to withdraw your offer if the home inspection reveals major problems. Some inspection options have a cap, meaning the buyer and seller agree on an amount, e.g. B. $1,500.00. In this way, if more than this number is stated in the inspection report, the buyer can terminate the contract without penalty and receive a full refund of his deposit. The “cap” can be used as a negotiation tool; The higher the cap, the stronger the offer and vice versa.
3. Rating Contingency
When you get financing, the bank needs a licensed appraiser to appraise the property to ensure the home is not selling for more than it is worth. A valuation reservation protects the buyer if the valuation (value of the house according to the lender) turns out to be low. In some cases, this means that you as a buyer without a valuation obligation would have to pay the difference out of your own pocket. If the buyer takes advantage of this opportunity, he has an opportunity to negotiate with the seller on how to make up this difference, giving the buyer more bargaining power. If the parties ultimately cannot reach an agreement, the buyer has the option of getting away with this contingent liability. Partly this is also covered by the financing requirement. Consult your attorney or representative for details on how your report or financing proposal should be drafted for maximum protection.
4. HOA/Condominium Association Emergency Situation
This case applies to Boston properties that have a homeowners association (HOA). Specifically, an emergency HOA contract grants prospective buyers the right and reasonable time to review all HOA documents related to the property, as well as any obligations homeowners have to the HOA. Should HOA documents not arrive on time, or should the prospective buyer, like you, disagree with HOA obligations, homebuyers can walk out of the deal with no penalty. This is an important contingency to consider if your property is operating under an HOA. In Boston, most condos work with a condominium association, so this case is quite common.
5. Lead paint emergency solution
This is an important eventuality to consider when buying a property in Boston. Boston is known for being one of the oldest cities in the country, but with that old world charm comes certain downsides, such as the possibility that your home contains lead paint. Although exposure to lead paint is harmless for adults, it can be particularly dangerous for children under the age of 6. While the law requires the seller to disclose all known information regarding the presence of lead paint on the property, the lead paint does not require the seller to conduct an inspection. In the case of a lead paint quota, the buyer has the option of carrying out an inspection (at his own expense) and, based on the results of the lead inspection, withdrawing from the contract without penalty.
6. Emergency Repair
Repair contingency allows buyers to request repairs or fixes for any issues they find during the inspection process. After the property inspection, buyers may identify specific repairs or issues that they believe need to be addressed to ensure the structural integrity of the property. The repair quota offers buyers the opportunity to negotiate with the seller for the repairs, either by requiring the seller to carry out the repairs themselves or by reducing the purchase price to cover the repair costs. In short, this emergency allows buyers to protect their Boston real estate investment and ensure that any damages are covered.
7. Home Sale Contingency
This is a very common case for second or third home buyers who need additional equity from the sale of one of their homes to fund the purchase of another home in Boston. Even if you have the funds to cover the down payment, not every potential homebuyer can afford the expenses (including closing costs, mortgage payments, etc.) for two homes. This contingent liability gives buyers the option to back out of a contract if they are unable to sell any of their current properties before a certain date in order to secure the property they have purchased.
8. Title Contingency
This emergency ensures that the title of your dream Boston home is free of liens or other issues. This grants the buyer the right to verify the title or the buyer’s attorney to verify the title. The title is a document that contains the full history of ownership of the property. If the title cannot be clarified, this case can sometimes result in the buyer being able to withdraw from the contract without penalty.
9. Insurance event
Banks that lend to homebuyers typically require homeowners to take out an insurance policy before completing the loan. Home insurance covers all costs should damage occur that may be covered by the policy. This provides protection for both the buyer and the lender, and allows the parties to recover the value of the mortgage should something happen. If for any reason the buyer is unable to obtain an insurance policy, the buyer may terminate the contract without penalty if this case is included in the offer.
10. Environmental or Hazardous Substance Risks
This contingency is critical when assessing potential environmental hazards or materials. The emergency offers buyers the opportunity to conduct environmental inspections/assessments to identify any risks associated with the property in relation to potential pollutants such as lead, radon, asbestos, old asbestos, lead, mold etc. This case gives buyers the right to request additional information from the seller and negotiate any remedial action if hazardous materials are discovered.
Feel empowered to buy the right Boston home for you!
Understanding the complicated world of home buying and its contingencies is indeed a daunting task, but with the right knowledge and guidance from the right Boston real estate agent, it can also be helpful. Being aware of these ten most common eventualities will allow you to navigate the home buying process with more confidence and ensure your interests are well protected.
Remember that every purchase is unique and requires careful consideration of all factors. Seeking professional advice can also be beneficial to ensure that every aspect of your agreement is in your interests. So contact us to speak to a local professional real estate agent in Boston. At Boston Pads we have many incredible resources available to you – including our mortgage calculator if you are just starting out in your home buying process. Have fun looking for an apartment and good luck in finding the perfect home that meets your expectations – we look forward to working with you!
Aubrey Liss
Release Date: May 30, 2023
Aubrey Liss has been a licensed real estate professional since March 2004. In early 2005, Aubrey moved to Boston and began working with Jacob Realty. With an extensive background in home sales and a long family history in real estate development, she has been instrumental in expanding the Jacob Realty sales team. Her policies and leadership skills helped her achieve the title of Director of Operations for several leading brokerage firms since 2006. Aubrey remains engaged and well-informed on the latest market trends in both investment and residential products. Ms. Liss is happy to support brokers and landlords in the development of real estate, which, depending on market conditions, unfolds their highest sales and rental potential. Aubrey has over a decade of experience in complex development, including by-right projects and successfully managing the variance process throughout the Boston area.
