When most Arizona home buyers put an offer on a home, they make the offer contingent upon being able to borrow enough money to pay for the home. This is the ” Loan Contingency” or “Financing Contingency.”

Loan Contingency

If a seller accepted your offer but it turns out later you can’t get the mortgage loan you described in the offer, then you can usually cancel the contract and receive a full refund of your earnest money.

Appraisal Contingency

In addition, your lender is going to require that you pay for an appraisal of the home. If the lender’s appraisal comes in at less than the sales price in the contract, then you can usually cancel the contract and get your earnest money back as stated in your contract.

(In reality, a common result when the appraised value comes in lower than the contract price is that the seller will agree to lower the contract price to the appraised value. Otherwise, the buyer would likely cancel the contract.)

Be aware that you will not be reimbursed the cost of the inspections and the appraisal after you cancel the contract.

Not Having the Down Payment is NOT a Contingency

The down payment amount you promised in the contract is NOT part of the loan contingency.

That means if your contract says your down payment will be $X but in the end the sale can’t close because you don’t have the full amount of the down payment you promised, then you may very well lose your earnest money as well as the house.

This post is, of course, just a thumbnail of a few of the complex contingency issues seen in Arizona home purchases. (Beware of the deadlines for canceling when a loan or appraisal contingency is triggered.)

Please feel free to call me if you have any questions about this extremely important issue.

I want to be your Realtor!