1. What is “attorney review”?
The standard contract used in residential real estate transactions contains an attorney review clause. The clause allows for a three day period from the signing of the contract during which the buyer(s) and the seller(s) have the right to have an attorney review the contract. During attorney review, there are usually some minor alterations to the terms of the contract. During attorney review either party may cancel for any reason.
2. What is the “mortgage contingency”?
The standard residential real estate contract contains a mortgage contingency clause. If the purchaser is buying with benefit of a purchase money mortgage, then they have a deadline by which they must apply for that mortgage. Failure to apply by the date constitutes an actionable breach of the contract and/or cause for the cancellation of the transaction. If the purchaser applies, but is not approved, then the clause is an escape clause that allows them to cancel the contract.
3. What is the “home inspection contingency”?
The standard residential real estate contract contains a home inspection clause that give the purchaser a period in which they may have a qualified building inspector inspect the premises. The home inspector will render a report. Through their attorney the purchaser(s) provide the report to the seller(s). The purchaser(s) may request that the seller(s) make certain repairs or give them a credit toward the purchase price. But most transactions are “as is”, so the seller(s) do not have an obligation to repair. If the parties do not agree then the transaction may be canceled.
4. What happens to the deposit money when the transaction is canceled?
The purchaser(s) and seller(s) must agree on the disposition of the deposit money if the transaction fails. Therefore, it depends on the circumstances in which the contract is canceled.
