PARAMOUNT MORTGAGE - LENDER'S BLOG

Christine and Nigel Gibney contracted to buy a house from Helen and Randy Pillifant for $620,000, reports real estate writer Tracey C. Velt, Tracey Velt Consulting, LLC.

The purchase contract stated the sale was "contingent upon this property appraising for no less than $620,000," according to court documents.

Two appraisals were done. One arranged by the Gibneys (the buyers) came in at $560,000. The Pillifants (sellers) then secured their own appraisal that valued their house at $635,000.

The buyers refused to close and terminated the contract.

The sellers sued for breach of contract, arguing that any appraisal of $620,000 or more obligated the Gibneys to buy the house.

The sellers lost their suite in Florida's Second District Court of Appeal.

Too often, homebuyers and sellers think a contract allows for one thing, when the language says something else.

"Contingencies should be written in full sentences," states Jeff Marks, a partner with Ryan and Marks Attorneys LLP, Jackson, FL.

To eliminate all confusion, the contract should have stated, “This agreement is contingent, at buyers' option, on the property appraising for at least $620,000 as determined by the appraiser for the buyers' lender,” offers Marks.

Here are four ways to avoid making common contract mistakes.

Give yourself time to get a loan

Buyers must allow plenty of time for the appraiser, lender and others to complete their tasks before loan approval is issued. Missing a financing contingency deadline date could allow termination of the contract and forfeiture of your earnest money deposit.

Be specific about which items stay with the house

No home buyer wants to walk into a new home only to learn that the refrigerator or chandelier is missing. Buyers must carefully read the contract. Don't assume that the Sub-Zero refrigerator is yours once you close.

Know the effective date

A contract should indicate the time periods and specific dates when tasks such as an inspection, loan application and approval, or title search must be completed. If you don't know the date that the contract went into effect, you may not have a valid contract.

Get everyone to sign

All affected parties must sign the contract. If a party to the transaction fails to sign, such as a spouse, or one of the partners of a corporate-owned property, they’re not bound to perform the contract.

When buying a house make sure everything that's important to you is in writing.