Appraisal Contingencies allow buyers to renegotiate price and other terms after acceptance and after the appraisal shows a value less than the purchase price. Such protection might be a good contingency in a buyer’s market from the buyer’s perspective. It’s deadly for the buyer in a seller’s market. Owners want to commit to buyers who commit to closing on the agreed-upon terms and price. If you need the protection of an appraisal contingency, determine if you need all of the protection. If you would walk away if the appraised value is $1,000 less, you’re not a reasonable risk. If you’d promise to close still if the price was $10,000 less than the sale price, you’re less risky.

The offer to purchase has an optional appraisal contingency. It can be modified to be more or less restrictive. Even if that contingency is not included, but a contingency to get an acceptable commitment letter is part of the offer, a mortgage appraisal may become a factor in the buyer’s ability to move forward. Buyers and sellers should prepare to discuss proof that a buyer will and can go to closing regardless of the results of any appraisal.

Radon Testing Contingencies

Radon is a cancer-causing gas. It’s present everywhere. The office you spend eight hours a day, five days a week, has radon gas. Your current home has radon gas. Costco has radon gas, and so does the local coffee shop. We have no idea of exposure 24/7.

Testing a house to see the radon level at the test will cost about $200. The result will not show you the continued level of exposure, just the level at the moment. Deciding I am radon gas safe because a 48-hour test revealed a radon level below the EPA action level is irrational. Deciding not to buy a house because a 48-hour test showed an average radon level above the EPA action level is a choice that excludes facts of science.

Radon gas is one of the most uncomplicated conditions to cure. Radon mitigation installers are easy to find. The cure is simple. An opening in the basement’s concrete slab, some PVC pipe, and a $200 fan, all for less than $800, comes with a guarantee to keep the radon level below the action level 24/7, 365 days a year.

By including a radon testing contingency, you make your offer less attractive and gain nothing. By accepting an offer with a radon test contingency, you’re placing yourself in a position to renegotiate more than an $800.00 cure. A better idea: Install a mitigation system and be safe.

There is no financing contingency.

A long time ago, I saw offers that included something like: This offer is contingent upon the buyer obtaining financing on terms of _________. That contingency meant the buyer could walk away at the end of the time set for closing if the lender did not provide the funds to close. Unless specifically written, the standard offer to purchase in Wisconsin does not include the protection of the buyer receiving any money from a lender. The contingency only protects the buyer if they cannot obtain a commitment letter for the financing as written in the offer. And, even that is up to the legal interpretation of phrases in the contingency.

There is no contingency to get financing. Even after the buyer receives the commitment letter, they are not guaranteed to get the money until all documents are signed at closing and approved by the lender.

Who knows what a cash offer is?

I have yet to see a person walk into a closing with a backpack stuffed with 22 pounds of $50.00 bills to buy a house for $500,000. A wire might transfer the “cash,” or a bank may provide the money in a mortgage or short-term loan. Calling an offer a “Cash Offer” overlooks that the proposal does not include a contingency to get a commitment-to-loan letter. Without a commitment to loan contingency, the seller is wise to see proof that the money is available today, or if the seller doesn’t mind, the funds will be available on the day of closing.

Suppose you are not in a position to assure the seller you can buy without getting a loan, but you can guarantee the seller that you have sufficient funds available or will at the time of closing. In that case, you could make an offer that is not contingent on getting the commitment letter. As long as you can satisfy the seller’s need to know you have or will have the money on the closing date, you too could make a “Cash Offer.”