What Sellers Need To Know

When you're selling your house, the last thing you want is for the buyer to cancel the contract and walk away with their earnest money. It can leave you feeling helpless and uncertain about the fate of your home sale. So, what's the point of earnest money anyway? Let us explain. Earnest money serves as a show of GOOD FAITH from the buyer. Essentially, it is a deposit on the purchase. However, buyers can cancel the contract and get their earnest money back under certain circumstances. In today's blog, we'll discuss the details of why and when buyers can cancel in Arizona.

The Inspection Contingency

One of the most common contingencies in Arizona real estate contracts is the INSPECTION CONTINGENCY. Here's what you need to know:

• Buyers have 10 days for inspections.
• During this time, they can cancel for almost any reason and get their earnest money back.
• If they disapprove of inspection items, they can cancel within 5 days of your response.
• Buyers have a wide range of reasons to cancel, including personal preferences.

This contingency allows buyers ample opportunities to cancel within the inspection period, creating uncertainty for sellers.

Also Read: The Basics Of Home Inspections And What Might Be Discovered

Request For Repairs

Buyers can still cancel if you decline to make REQUESTED REPAIRS:

• If you refuse or agree to only some repairs, buyers have 5 days to decide.
• If you don't agree to all requested repairs, buyers can cancel.
• This adds another layer of potential cancellation.

Depending on your response to repair requests, buyers may choose to cancel.

The Appraisal Challenge

Buyers who are financing their PURCHASE need an appraisal:

• If the appraisal comes in below the purchase price, buyers can cancel.
• They have 5 days after notice of the appraised value to decide.
• Sellers can lower the price to match the appraisal to keep the deal alive.

If the market conditions don't favor it, buyers might choose to cancel due to a low appraisal.

Also Read: The Risks Of Forgoing Real Estate Agents: FSBO Seller Regrets

The Loan Contingency

The loan contingency serves as the final safety net for buyers FINANCING their property purchase::

• Activates for Financed Purchases: It applies only if the buyer is obtaining a loan.
• Time-Sensitive Decision: Buyers can cancel up to 3 days before the close of escrow.
• Loan Approval Crucial: If a buyer no longer qualifies for the loan, they can withdraw from the contract.
• Earnest Money Return: Buyers can get their earnest money back under this clause.

This clause provides a last-minute out for buyers, which, while crucial for them, introduces a significant element of uncertainty for sellers. The loan contingency can be a source of anxiety, especially as the closing date nears:

• Last-Minute Cancellations: The possibility of cancellation just 3 days before closing can be stressful.
• Earnest Money Refund: Sellers must be prepared to refund earnest money even at this late stage.
• Due Diligence Required: Buyers must demonstrate they've made a diligent and good-faith effort to obtain loan approval.

Sellers need to be aware of this contingency's implications and prepare accordingly.

Also Read: Top 5 Unconventional Tips For Buying A Luxury Home In Arizona

Tip: Have Backup Offers

To ensure your home sale goes through, consider having BACKUP OFFERS:

• Backup offers can step in if the primary buyer cancels.
• Use the right list price strategy from the start to attract backup offers.

Backup offers keep the process moving towards closing, providing a safety net in case the primary buyer cancels.

In conclusion, understanding the contingencies that allow buyers to cancel in Arizona is crucial. These contingencies introduce uncertainty and potential cancellations into the home selling process. To mitigate these risks, having backup offers in place can be a smart strategy, ensuring that your home sale progresses smoothly! Even if the primary buyer decides to cancel.