What are all of these contingencies?

Understanding the Real Estate Process from A – Z – A Seller’s Guide to Real Estate – Part 8

This is the eighth post of a series in an FAQ format that I hope will help would be sellers better understand the real estate process that they are about to go through. There will be a follow-on series for real estate buyers.

FAQ – What are all of these special contingencies in the offer?

Special contingencies -  Most Purchase Agreements will already have a number of contingencies specified within their standard terms and conditions. Those might include a home inspection, a

successful mortgage application, an opportunity to see if flood insurance is required, a requirement that   proof of a marketable title be furnished, a final walk through before closing and even a target or required closing date. Those are things upon which the success of the sale is contingent; things that the buyers (and sellers) must agree upon as having been done and the results to be acceptable to the Buyer before the sale can be consummated. In addition to those, the PA may contain, either within itself or in Addendums to the PA, other special contingencies. Some common ones are:

·         

      Contingent upon sale or closing of the buyers’ home. In this case the buyers are saying that they still have to sell their house (it may not even be listed yet) or that they have sold it and this offer is contingent upon that sale taking place or on the existing sale closing. These contingencies usually have a time limit and may have a provision that allows the seller to continue to market the house and to accept other offers, subject to giving the current buyer the opportunity to remove the contingency and proceed to closing.  Listen closely to the advice of your Realtor on any contingent offer. Consider carefully any contingency that requires that you remove your home from the market for some extended period of time.

·         Well and Septic Inspections. These are usually added on Addendum and make the sale contingent upon the satisfactory results of those two inspections. Those inspections cost extra and many contingency clauses try to make the Sellers responsible for paying those costs. The septic inspection also requires that the lid to the septic tank be exposed, which usually means digging up the yard over that lid. Make sure that it is specified that the Buyer will return the yard to its pre-inspection state (or as close as possible to that state) so that you don’t end up with a big hole in the yard.

·         Pool inspection. If a house with a pool (of any type) is sold in the winter the pool is normally closed

and this contingency addendum allows the buyer to wait until warmer weather, when the pool can be opened to perform the inspection of it. This does not normally hold up the sale, but it may provide for some amount from the sale to be escrowed in case the pool and its equipment need repairs when inspected.

·         Radon testing. Radon is a naturally occurring radioactive gas that is quite common in this area of Michigan and is a major cause of lung cancer. A radon test takes a couple of days and involves putting a testing device in the basement of the home to measure for radon levels. Levels above 4 picocuries per liter require remediation. The good news is that radon remediation systems work and once the home has one it will be safe as long as that system is working.

·         Review of the Association Master Deed and By-Laws – If this is a condo listing (or in Michigan a Site-Condo listing) or a listing in a subdivision with a mandatory Home Owners Association (HOA), there will probably be a contingency that gives the buyer the opportunity to review the HOA Master Deed and/or By-Laws. Those provisions, which may be in a special Addendum or in the terms of the PA, usually have a time requirement that the documents be supplied by the seller within a few days of acceptance of the deal and that the buyer review them within a few days of receipt of them. The buyers usually have the option to opt out of the deal if they find the restriction in those document to be too onerous.

·         Review by the Buyers’ attorney – Even though almost all offers are written up on “standard”

Purchase Agreement forms; and those forms contain time proven and tested terms and conditions that have been legally reviewed, some buyers will still want their own attorney to look the contract over, especially any Addendums that contain contingencies. That is their right and is even spelled out in the standard wording of the contract. The Buyers’ Attorney is expected to comment only on the terms and conditions of the contract and not to get involved at all with the agreed upon sale price. Many attorneys feel like they have to earn their fee by finding something in the contract to object to on behalf of their client. They may mark out a term or condition of add something to the wording that is there. If they do that the whole deal may be held up while the revised contract is submitted for legal review by the real estate companies’ legal counsel.

·         An FHA or VA Addendum – Both of those Addendums, which are associated with mortgages of the same names contain terms and conditions that must be met in order for the property to qualify for a mortgage backed by those institutions. If the house fails to meet those terms and conditions the Buyer may back out of the deal.

·         Other specified contingencies. The PA may contain other addendums with terms and contingencies, so read everything carefully. Remember that the terms of most contingencies specify that the buyer must be happy with things once the contingency is met. Only the Contingent upon Sale or Closing usually specify that the Seller must be happy.

Contingencies all carry risks with them that the Buyer will not be happy with the results or outcome of the contingency. Since contingencies normally are handled after the offer is accepted and the house marked Pending in the MLS, that means that if the Buyers decide to exercise their option to walk away from the deal your house will have been off the market for some length of time.

Lest the Sellers think that the deck is stacked against them with all of these possible contingencies, or that they are being forced down their throat, it is important to note that these contingencies have all been developed over time to protect the consumer (the Buyer); however the Seller always has the right to refuse to accept any contingency. The Sellers have no reason to fear them, if they have been honest with their agent and listed any and all know issues that the house may have. In some cases, these contingencies may cover things that the Sellers have been willing to live with that new owners would find onerous or unacceptable.

Sellers should go over each contingency with their Realtor® to make sure exactly what the contingency is about, what burden it puts on them (i.e. who pays for any of the required services to accomplish the contingency) and what the consequences of the contingency not being successfully met may be. Almost every contingency provides an “out” for Buyers, a way for then to declare that the contract is null and void. Sellers should insist that all contingencies be accomplished and the results accepted as quickly as possible. You don’t want to hold your home off the market for 20-30 days waiting for the results of a contingency. 

I know I signed a contract, but what are my “outs”?

There was an interesting article by Benny L. Kass in my daily Realty Times news feed recently that covered the topic of when real estate sale contracts become binding.  You can read Benny’s article at -

http://realtytimes.com/consumeradvice/sellersadvice1/item/34181-20150408-when-does-a-contract-become-a-binding-contract

Benny is apparently from the Washington D.C. metropolitan area and the advice that he gives and contract that he references represent not only the legal side of things, but also the local real estate customs.

I suppose that some lawyers might argue that there is no such thing as a binding contract, just contracts that make it very onerous to cancel or get out of for cause. Locally (in Southeastern Michigan) almost all of the various Purchase Agreements (PAs) that I have seen from the companies

that do business in this area are binding when both parties have signed the contract; however, all of them have several clauses that provide “outs” for the purchasers. Those are contingency clauses that specify certain things that the buyer must be happy with in order to proceed or which must at least have outcomes that are to the buyers’ satisfaction. Usually there are time frames associated with each contingency during which the buyer must perform some inspection or test or complete other actions necessary to proceed to the closing. Perhaps calling then “outs” is a somewhat misleading term. They are not things that the Buyer actively looks for or uses to get out of the contract; but they are the contingencies that allow the Buyer to decide not to proceed with the deal and which allow the Buyer to get their earnest Money Deposit back in full. In most cases there are also provisions for the Seller to try to resolve any issues to the Buyers satisfaction. In every case there are also set time frames within which things must occur. Failing to meet the deadline requirements is considered to be acceptance by both sides of the state of things “as is”.

The first big hurdle that the deal needs to get over is usually the home inspection, which in this area is typically required to be done within 7-10 days (sometimes less) after the Seller and Buyer have both accepted the Purchase Agreement. The wording on most home inspections clauses usually specifies

how the Buyer is to express to the Seller his dissatisfaction with the findings and within what time frame. Most PAs then give the Seller some opportunity at a retort to the Buyers issues. Some contracts, however, let the Buyer move right to declaring the contract null and void, based upon his dissatisfaction with the inspection. If the contract wording allows the Seller time to respond it is usually short and the response requires that the Seller tell the Buyer what he is offering to re-mediate the issues. That could be an offer to have the problems fixed to the Buyers satisfaction or to reduce the agreed upon sale price by an amount that would allow the Buyer to resolve the issues after closing (that would be called a Seller Concession).  Should the Buyer and Seller fail to come to a mutually acceptable agreement on the issues the Buyer will normally have the option to declare the agreement to be void and get their Earnest Money Deposit back in full.

The next big hurdle is normally the appraisal, which is a key part of the Buyer’s ability to get the mortgage that he needs to buy the place. The contract normally specifies a window within which the Buyer must make his formal application for the mortgage, usually within a similar timeline as is set for the inspection deadline. Once the Buyer has applied for the mortgage, the mortgage company will order the appraisal. Getting the appraisal scheduled can take a week or more, so about 2-3 weeks

might pass from the time of acceptance of the contract until this appraisal actually takes place. The appraiser may take 3-5 days to get the report back through his management and into the hands of the mortgage company. If the Buyer gets one of those “Houston we have a problem” calls from his mortgage company another round of negotiations starts with the Seller.

The options for dealing with a low appraisal are that the Seller concede the difference between the strike price and the appraised value or the Buyer throws extra money into the deal to make up the difference or they reach some compromise in the middle.  Failing an acceptable compromise, most Purchase Agreements in this area would allow the Buyer to walk away from the deal and get his Earnest Money Deposit back. Appraisal issues have been the biggest cause of failed deals for the last couple of years, because the mortgage companies and the appraisers have been very conservative and have not kept up with the rising property values in the market.

Another part of the mortgage contingency language in Purchase Agreements also provides an “out” for the Buyer if the mortgage company turns down the mortgage, even if the house did appraise. OK, how can that happen? There are lots of things that can cause the underwriter at the mortgage company to turn down the mortgage, even if the mortgage originator (the mortgage agent that the Buyer was dealing with all along) thought that the Buyer was golden. Buyers can get a “Pre-Approval Letter” based on nothing more than the preliminary information that they give to the mortgage agent and a quick credit check.  Once the mortgage is actually applied for the file goes to the underwriter (that mysterious man behind the curtain) who begins an in-depth review of the deal and the Buyer. The Buyer is asked to provide all sorts of detailed financial information that wasn’t required initially and the devil is usually in those details.

The underwriter may look at up to two years’ worth of financial statements and tax returns (sometimes more), check on employment and review all recent credit purchases looking for any red flags that might indicate that the Buyer doesn’t have the wherewithal to carry this new debit load. Things like getting some money from mom and dad to make the down payment may seem to the Buyer to be his own business, but to the underwriter that is a red flag that must be explained and documented. Was it a gift or a loan? The underwriter also reviews the PA, the title work and any other documentation that may have a bearing on the deal; because his job is to protect the bank from undue risk.  This contingency, like the others in the PA, has a deadline; usually the mortgage must be approved (or denied) within 30-45 days from the date when all parties signed the deal. If the Buyer is turned down for the mortgage, most PA contracts contain provisions for the Buyer to back out of the deal and get his Earnest Money Deposit back.

There is another contingency written into most PAs that could occur between those two steps. When a real estate deal is signed one or both of the Realtors® involved will engage a title company to do the research on the title to the property to make sure that it can be passed to the Buyer at closing. Depending upon the office practices of those Realtors and t3he provisions within the PA, the title search could occur anywhere from a few days to a week or more after the PA is signed. The title search is done at the County Register of Deeds office and any and all recorded encumbrances upon the title are usually found. That may include recording for the sale of mineral rights (usually oil and gas), recordings of any tax liens against the property, recordings of any trades liens (sometimes called mechanics liens) against the property, all recorded easements for utilities, or access rights and any rights-of-way.

The “Title Commit” that comes back from the title company, based upon that search, gives a detailed list of any issues that were found or which need to be resolved in order to insure the title at closing. The PA language usually specifies both a deadline for getting title work done and to the Buyer for review and any objections, as well as provisions about how the Buyers objections must be expressed to the Seller.  Usually the Seller is given some time frame to rectify any issues with the title that the Buyer has; however, if the issues cannot be rectified to the Buyers satisfaction, this is another “out” for the Buyer and he gets all of his Ernest Money Deposit back. Deals have fallen through because of issue with the encumbrances on the title that could not be resolved.

So, let’s assume that the Buyer has gotten through all of these things and was satisfied with each; is it now full steam ahead to closing and the Buyer is now locked in? Well, almost. There is one final “out” that the Buyer could end up using. That last hurdle is the final walk-through. Most contracts

have a provision for the Buyer to walk through the house right before closing to be sure that the house is in substantially the same condition as the day that the offer was written and that the Seller has not damaged the house or removed items that were in the contract or considered to be a part of the house at the time of the offer. I have not had a deal fall apart at that late point, but I have heard of it happening. Sometimes Sellers do something stupid that dramatically changes the house as far as the Buyer is concerned and the Buyer is within his contractual rights to refuse to go through with the closing, if that is the case. Once again the Seller is usually given the opportunity to correct the issues.

If it seems like there are many places where the Buyer could back out and the deal fall apart, there are; however, in most deals both parties really want the deal to go to closing, so most of these “outs” are never used. The Buyer and Seller usually work out some compromise on any and all issues. It may be that the Seller makes repairs, offers price concessions, or corrects issue with the title or that both reach some agreement on how to handle the low appraisal. Most of the time, the sales go to closing.

There is one condition for which the Buyer really has no “out” and that is just getting cold feet and the last minute, sometimes called “buyer’s remorse”. This can occur for many different reasons and at any time, but it is usually after all other contingencies have been met and the closing is scheduled.  If, at that point, the Buyer has signed off on the home inspection and title work and been approved for the mortgage, he cannot just change his mind and back out, without consequences. No one can make the Buyer go through with the closing; however, at that point he will usually lose his Earnest Money Deposit, which will be given to the Seller (usually split between the Seller and his listing broker) as compensation for having taken his house off the market for the time that the deal was in-process.

If you are a Buyer, your Realtor should go over the Purchase Agreement with you in detail and explain all of these contingencies, so that you know what your rights are at every phase of the deal. If you are the Seller, you must understand that the Buyer has the right to back out of the deal and get his Earnest Money Deposit back if you cannot resolve these issues to his satisfaction. Most of the time the issues that come in a deal can be resolved and it makes no sense to blow the sale up and lose the Buyer over an issue that may have a relatively low price tag for resolution. If the home inspection finds Radon in your basement and you refuse to put in or pay for a Radon remediation system for $800, you have just bought your house back for that $800. Is it really worth it on a $200,000 to $300,000 sale? There may be some things that you just can’t fix or that you can’t offer a big enough price concession to overcome and the deal will fall apart. You’ll have to resolve those issues before you get another buyer, one way or another, because they will come up again. As the Seller, you have no ”outs” on those issues.

Hopefully, as either a Buyer or Seller, you now better understand the contingencies that may be within a real estate Purchase Agreement. Whichever side you are on, read that PA carefully before you sign and know your obligations and your outs.

Contingencies - Part 2

This is the second of two installments on the contingencies that may be a part of any real estate Purchase Agreement (PA) contract. In the first part we discussed the contingencies that are likely to be written right into the PA itself. In this installment we'll look at the clauses that are likely to be written-up on separate Addendums that are attached to the PA.

Wood Destroying Pest Inspection.
This could be thought of as an extension to the home inspection process. In many areas termites or powder post beetles are a problem and should be looked for by a qualified pest inspector. The addendum should specify who will pay for the pest inspection and whether outbuildings or garages are covered in the inspection. This clause may also require written notification to the Seller and specify a response time from him. Sometimes the home inspection will uncover evidence of a possible infestation which then may require this separate inspection to be done. The issue of who would pay for any repairs may be handled separately; however this contingency, like all others, should specify what happens if the Buyer is dissatisfied with the results and what requirements there will be for a Seller response. Also needed here and in all of the addendums below is a statement about the Buyers right to declare the contract to be void, should agreement on resolving any issues not be reached.

Roof Inspection.
Some home inspectors will not walk on a roof due to possibility of damage and / or liability if the roof is damaged. Most home inspectors can tell, even from the ground, if there are issues that warrant further inspection. Some buyers hire a roofing company to conduct a roof inspection. A good home inspector should be able to cover this issue. At issue here may be more than just the age of the roof, since there have been roofing materials recalls that could impact even a newer roof.

Septic or Sewer Inspection.
Sewers can get clogged from tree roots or deteriorate over time. Plumbing companies can insert a camera into the sewer line to check for damage during a sewer inspection. Septic fields too may become saturated or the field tiles become clogged. Septic inspections usually require that the tank be pumped and that core samples be taken at various points in the field to test its condition. In our area, the Seller normally pays for this test and the water test (see below), but not always. In houses with septic fields, this is potentially the most expensive issue that an inspection can uncover; since replacing a septic field, especially an “engineered field,” can run much more than $10,000.

Private Well Inspections.
If the home is not connected to city water -- on a private well, buyers may want assurance that the water is potable and meets acceptable health standards. This is a test that involves taking a sample at the house and sending it out for analysis, usually to a county health office. It can take several days to get results. A high arsenic level in the water is a common issue, as is high bacteria counts. The bacteria issue is relatively easy to treat; but, the arsenic issue or other toxins in the water may be a show-stopper.

Radon, Mold or Asbestos Inspections.
Depending upon the area the home is located in or as a result of the visual inspection, home inspectors sometimes will recommend additional inspections by licensed entities to check for special situations such as radon gas, mold or asbestos. A good home inspector will be able to do these tests and have the necessary equipment to do them, but at an added cost. The mold test requires that samples be taken in the house and be sent out to a lab for testing, to identify the mold type. Most molds are not the dreaded “black mold” that yo may read about, but even the more common types may need remediation by professionals. Radon is a naturally occurring radioactive gas in the soil that can bubble up and enter the house through the basement. Radon in the number 2 or 3 cause of lung cancer in the United States and is fairly common in areas of the country that were once covered by glaciers (like Michigan). If the basement is to be used for anything other than just storage, getting a Radon test is advised. The radon test requires that an instrument be left in place in the lowest level of the house for 48 hours to record radon levels hour by hour. Asbestos was once used extensively within homes to insulate pipes and even as a siding material. Now considered to be a dangerous carcinogen, it is a good idea to at least know where any asbestos is in your home. The inspector will be able to see most asbestos issues. If the asbestos is “sealed” by being wrapped with tape and painted over (as most pipe insulation installations were) you may choose to just leave it alone. The same is true with asbestos siding; however, any and all of these issues are grounds for the Buyer to ask for professional remediation or to back out of the deal. More sales are canceled because of mold issues or radon issues than most other causes. Asbestos is still out there but is less of an issue and not an issue at all in newer-build homes.

Early Occupancy Agreements.
Contracts can be contingent upon the buyer and seller entering into a written agreement that allows the buyer to rent the property prior to close of escrow. This is known as early buyer possession. This is fairly rare in our area and most lawyers would advise Sellers not to accept this contingency. This contingency may just end up being a completely separate contract.

Homeowner Association Documents & Private Road Agreements.
Buyers should obtain for approval a copy of all homeowner association documents, including meeting minutes, if applicable. There is usually a timeframe specified for the review of the Master Deed and HOA By-Laws, after which the Buyer has to object or agree to proceed (which he/she will by default if they don’t bring up issues during the timeframe). Most of these HOA review contingencies also include a provision for taking a look at the HOA budget and financial statements to make sure that the HOA is solvent and capable of meeting it’s obligations without resorting to “special assessments.” Homes that are on private roads (which includes almost all “site condo” developments) should also make available a copy of a written Private Road Agreement (unless that is covered already in the Association By-Laws), which is signed by all of the homeowners on the road and specifies how the road will be maintained and how the cost will be split. Many mortgage companies now require a copy of the Private Road Agreement before granting a mortgage. Unfortunately, many private roads were created and developed without these agreements. Just saying, “Old Bob at the end of the road just takes care of it” won’t meet the requirements of most mortgage companies and it can become a major, last-minute hassle to try to get everyone on a private road to sign up in the midst of a sale.

Contingent upon Selling Existing Home or Contingent upon Closing the Sale.
Buyers who have an existing home might want to buy before selling and make the contract contingent on selling their home. Sellers who accept contingent offers like this often give the buyer a certain number of days to perform. If the buyer cannot perform, the seller retains the option to cancel the contract. These contingencies essentially give the Buyer the “first right of refusal” on any other sales offers that come in, usually granting the original buyer 48 or 72 hours to remove the contingency or lose the house. A variation on this theme is where the Buyer's home has been sold but has not yet closed. The Buyer may make the Purchase Agreement for his new house contingent upon that sale actually getting through closing. Sellers in the today’s market aren’t likely to accept a Contingent upon Sale addendum, because they know that it might take the buyer over a year to sell his house; however, the Contingent upon Close Addendum is fairly common.

Contingent upon Whatever.There are likely many more potential contingencies that I’ve missed here. The point is that the two parties can agree upon making almost anything a contingency. They just have to state clearly what the contingency is and what the consequences are if that contingency is not met prior to the closing. Other things might include that the sale is contingent upon a land split being finalized or a re-zoning of the property being approved or any number of local legal issues or home condition issues being resolved. The contingency clause is like the "If-Then-Else" statement in computer programming and needs to be just as unambiguous. IF the Seller does this, THEN the buyer will proceed to closing, ELSE something other than a closing happens.

Documenting issues.
Most of the contingencies that we’ve discussed will have some provisions for notifying the Seller, should issues be uncovered that need to be resolved. Usually there will be a timeframe specified (3 days seems normal) to provide that written notification to the Seller and a timeframe specified for a response from the Seller (again 3 days seems normal). Those documents do not necessarily become a part of the contract; however, once some agreement is reached between the Buyer and Seller, that agreement should be documented in an Amendment to the PA; which specifies what the Seller has agreement to do – make the repair or offer some amount of money off the purchase price as a concession to the Buyer. If a repair is to be made, there is normally some re-inspection clause in that agreement, which becomes a new contingency (the Buyer must now be satisfied with the repair or may still walk away).

Removing contingencies.
In general, it is a good idea to have another document, sometimes labeled as an Amendment, to remove each contingency as they are satisfied. Most contingencies have some deadline stated right in their wording; however, just letting that deadline pass may not automatically remove the contingency. It is best to create a document that says that the contingency has been resolved to the satisfaction of both parties and have both the Buyers and Sellers sign it. It is important to have a “paper trail” for every aspect of the contract and removal of the contingencies just wraps things up nicely.

Purchase Agreement Contingencies - Part 1

This is the first of a two-part posting dealing with the contingencies that might show up in the purchase agreement for a real estate sale

In almost every offer that a buyer makes there are contingencies specified. These may be buried in the standard contract wording (most Mortgage and Inspection Contingencies are there these days) or they may be spelled out in one or more separate documents that are attached to the Purchase Agreement (PA). These are clauses that usually specify that the whole offer is contingent upon whatever this clause is about being satisfied prior to closing. If the contingency is not satisfied and later removed, the clause usually specifies that the buyer may walk away from the deal and get his/her earnest money deposit (EMD) back.

Here are the common ones that are likely to be a part of every deal and most likely are in the Purchase Agreement document itself.

Mortgage Contingency.
Even though a buyer may hold a loan pre-approval letter, further investigations concerning the property or the borrower could result in a loan denial. Usually the buyer is required to apply for the actual mortgage within some number of days (7 to 10 is typical) and provide proof that he/she has done so (another letter from the mortgage company will normally do). Usually the contingency also specifies that the buyer has 30-45 days to get the mortgage approved. If the buyer hasn’t procured a mortgage commitment by then the Seller may either extend the contingency deadline or declare the deal dead and walk away. This is almost always in the main body of the PA.

Flood Insurance.
This contingency is usually waived, if the home is not in an area designated as a flood plain. However, it is usually in the PA and gives the buyer the right to seek a Floodplain Certification (an official document that will specify whether or not the house is in a flood plain) within a specified amount of time (usually 10-14 days). If the home is designated to be in a Flood Plain the buyer must notify the seller and may declare the deal to be null and void and get his/her EMD back.

Home Inspection.
Buyers have the right to hire a home inspector and conduct a complete inspection of the home. This is normally a paragraph in most Purchase Agreements these days and usually specifies that the inspection must be accomplished fairly quickly (usually 7-10 days) after everybody signs the PA. This clause also normally specifies a requirement for the Buyer to notify the Seller in writing (a document usually called the Results of Inspection) within days (normally 3 days in this area) of any dissatisfaction with the inspection results. The clause may specify that the Seller must respond to the Buyers Inspection Results within days (3 is normal again) and either specify what he/she will do to take care of the buyers dissatisfaction – either by offering to fix whatever the inspector found to be wrong or by offering the Buyer some monetary concession of he’ll take the house “as is.” The Buyer may accept the Sellers answer or may decide to just walk away from the deal and get back his/her EMD.

Lead-based Paint.
Federal laws gives all buyers 10 days to inspect for lead-based paint. Many homes built before 1978 contain lead-based paint. This contingency also normally offers the Buyer the opportunity to have the property tested (at the buyers expense) for the presence of dangerous lead levels, within that 10-day period. It provides for notification to the Seller of the test results, if lead is found and gives the Seller time to respond with a remediation plan. If the buyer doesn’t like the sellers' response, he/she may walk away and get back their EMD.

Title Insurance.
The Seller is usually required to provide a copy of the Owner's Title Insurance policy, which will contain information about any easements and/or "blemishes" on the title that may affect the ability of the owner to pass a clean title. Most local PA’s specify that this preliminary title search must be done and he results given to the Buyer within 10-14 days of the agreement date If the buyer sees easements that are onerous to him or liens that might hold up closing, he/she can ask the Seller to clear those up before proceeding or could even declare the deal to be dead.

Municipal Inspections.
Some local government jurisdictions (Detroit, Taylor and Dearborn are examples in our area)require "city inspections" of houses that are being sold. Those inspections are done to make sure that the house is up to current building codes, prior to being sold. The Seller will be required to make any repairs or updates and to get a city issued Certificate of Occupancy prior to closing on the house. Most of these municipalities require the buyer to come in to city hall to pick up the certificate. If the Seller can't or doesn't do the repairs, some cities will allow the posting of a bond by either party to insure that the repairs are made later.

Seller Statutory Disclosures.
Sellers are required in Michigan to disclose all known material facts, including preparing and delivering a SELLER’S Disclosure document. This isn’t really a contingency document like the rest of these, but it is a document that the Buyer should review and if there have been any false statements made by the Seller this document would be grounds for canceling the deal or for later law suits. The buyer may cancel the deal and get his/her EMD back right up to the date of closing, if the Seller has not supplied a valid Seller's Disclosure. It should be noted that this document may be missing or say nothing, if the property is a foreclosure. The banks who own those houses often have their own, very lengthy documents that essentially say that they never lived in the house and know nothing about its condition - I call it the Sgt. Schultz Addendum.

Tomorrow we'll look at the contingencies that are more likely to be in documents that are attached to the standard PA as part of a deal. Those can vary greatly by region of the country, so we'll be looking only at those in use locally in Michigan.