All About Contingencies
As you browse listings on BerkshireHathawayHS.com or realtor.com, you may find homes you like that appear to be unavailable, due to some kind of contingency. If you find the perfect home, but it’s labeled Active Kick Out or Contingent, should you pursue it or forget it?
The reality is that contracts fall through sometimes. If you have a back-up contract, you can buy the home should it come “Back on Market” or “BOM.”
Active kick out
Active kick out means the seller has accepted a contingent offer, such as the buyer has a home to sell before they can close on the seller’s home. The seller can reserve the right to accept a better offer and “kick out” the previous buyer. They must give the first buyer 48 to 72 hours to either remove the contingency and move forward with the purchase, or back out of the contract.
Nearly all offers-to-buy have contingencies. Typical contingencies include provisions that the home must meet the appraised value by the mortgage lender’s third-party appraiser, or it must pass a professional third-party home inspection to the buyer’s satisfaction. The buyer may make the contract contingent upon the lender funding the purchase.
Option periods give the buyer time to get financing and complete home inspections and the appraisal. Unless the buyer acts on a contingency, the home is considered out of option but it can still fall out of escrow.
To learn more, contact your Berkshire Hathaway HomeServices network professional.
How to Buy a "Spec" or Model Home
What should you expect when you buy a model or “spec home” from a builder?
A model home features upgrades to show the builder’s floorplans to advantage. If you can wait until the builder sells all their inventory, you may get the model at the initial offer price and with more upgrades than other homes in the neighborhood.
A “spec” home is move-in ready. The clock is ticking on the builder’s bank loans, materials and labor, so if you’re preapproved by a lender and have no contingencies to delay closing, you can move in quickly.
Many builders have their own contracts, so you should be represented by your Berkshire Hathaway HomeServices network professional. Builders won’t negotiate price because of other homes in the subdivision, but your agent may be able to negotiate free or at-cost upgrades like adding a fence or back yard sod. The agent can help you negotiate better terms, see you through inspections, and make sure the builder performs as expected.
Shop for new homes with your real estate agent. If you can’t, inform the builder or their in-house salesperson that you’re represented and offer your Berkshire Hathaway HomeServices network agent’s contact information. Builders won’t pay the agent’s commission if you bring them in after you’ve already toured the model or spec home.