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Contingency - Real Estate Contingencies Explained - YouTube
Channel: Jones Home Collective, Inc.
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what the heck is a contingency in a real
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estate contracting why should you care
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my name's Trevor Jones with Jones home
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collective my wife Lila and I are local
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real estate agents serving see me
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Moorpark in the Conejo Valley I've lived
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here for 43 years and we love it here if
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you're watching this on YouTube and you
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haven't yet make sure you hit that
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subscribe button right there so you
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don't miss out on future content most
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real estate contracts contain
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contingencies these are provisions which
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allow a real estate contract to be
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terminated
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you are terminated when a buyer makes an
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offer she can include any contingencies
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she likes for example if she has a home
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to sell first she could say I'd like to
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buy your home contingent on me being
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able to sell my home first if she's
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unable to sell her home she can
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terminate the contract to buy hit the
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next home however submitting an offer
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with that particular contingency isn't
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always a great idea if you want to place
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an offer on a home and you've got a home
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to sell you want to make sure your home
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is on the market and under contract
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waiting for escrow to close before you
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make an offer on that next house to make
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your offer more appealing that's
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especially true in a seller's market
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when you may be competing with multiple
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buyers for the same house in California
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there are generally three primary
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contingencies that you can expect in
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most purchase offers the first one is
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the inspection contingency this allows
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the buyer a set period of time to send
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in one or more professional inspectors
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to look at the house and find things
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that may not have been readily apparent
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to the buyer when they looked at the
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house themselves if the buyer doesn't
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like something the inspector found the
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buyer can legally back out of the
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contract within the inspection
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contingency timeframe or the buyer can
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negotiate with the seller to have the
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issue in question repaired or replaced
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in California the default inspection
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contingency timeframe is 17 days but you
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can shorten that time period or
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completely remove the inspection
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contingency to make your offer more
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appealing in a competitive market
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however when you waive that contingency
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you're assuming more risk yourself
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the second contingency is the appraisal
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contingency if the buyer is financing
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the home
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the lender will require an appraiser to
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check out the house and make sure it's
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actually worth what the buyer is willing
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to pay for it if the appraisal comes in
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lower than the agreed-upon
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sales price you have a few options the
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first one is the buyer and seller can
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negotiate a new lower price that is
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equal to or less than the appraised
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value the second option is that the
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buyer can agree to pay cash out of
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pocket for any amount over that
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appraised value so that the seller gets
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the full amount but the lender doesn't
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have to take on that risk the third
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option is that the buyer's agent can
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dispute the appraised value by providing
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additional information to the appraiser
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we've actually done that last year the
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appraisal for a home we were selling
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came in fifty thousand dollars under the
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agreed-upon
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sales price but we knew the market very
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well and we knew that that appraisal was
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wrong so we obtained additional
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information with the help of our awesome
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tile rep Dory mentor from Chicago title
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and we were able to get that appraisal
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up fifty thousand dollars so it's sold
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for that agreed upon sales price slush
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that's one reason you always want to use
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a local real estate expert the default
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appraisal contingency time period in
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California is 17 days however a buyer
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can assume the risk and eliminate the
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appraisal contingency or at least
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shorten it to make their offer more
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appealing on a particularly desirable
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house the third contingency is the loan
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contingency nowadays in California when
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you make an offer you need to be
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pre-approved being pre-approved is a
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good indication that you'll qualify for
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a loan but it's not a complete guarantee
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the default loan contingency period in
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California is 21 days if a buyer for
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some reason doesn't qualify for the loan
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within those 21 days they can legally
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back out of the contract without risk of
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losing their earnest money again the
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buyer can make their offer more
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appealing by removing or shortening that
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contingency period but by so doing they
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are assuming some risk but what happens
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if the buyer fails to comply with the
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contingencies well the seller can cancel
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the contract and you can lose the house
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and you may also be at risk at losing
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your earnest money to learn about
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earnest money you might want to check
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out that video right there make sure you
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subscribe to don't miss out on future
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videos and if you're looking to buy or
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sell a home give me a call I'd love to
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help you out
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