The process of buying a home in the U.S. Virgin Islands often comes with uncertainty and emotional ups-and-downs, as well as numerous questions and concerns related to mechanics of a closing in “America’s Paradise” and the financial aspects of the transaction. So when it’s finally time to close the deal, it might be tempting to let excitement and relief take over a little too early, at a time when taking a microscope to all aspects of the real estate deal would actually be in your best interest.
One of the best protections buyers have is the ability to draft and include contingencies in the purchase contract, which require that certain conditions must be met by the seller or the buyer during the period between the signing of the contract and the final closing. These contingencies must either be met or removed to avoid either party calling off the deal, or the deal must be renegotiated. The following are some of the most common contingencies to look out for:
- Buyer’s inspection contingency: This contingency is very common, and a smart buyer will almost always insist upon its inclusion in the contract. Requiring that the house pass muster in the eyes of professional inspectors is a necessity to ensure all aspects of the home — including the roof, electrical work, AC system, plumbing, foundation, floors and more — are in good and safe physical condition. Separate inspections for pest infestations, natural disaster hazards and environmental hazards like mold or asbestos may also be included. Ultimately, having this contingency in the contract protects the buyer from being unexpectedly saddled with an unsound home or responsible for major repair needs that the seller failed to disclose.
- Financing contingency: A financing contingency protects the buyer in the event that a projected loan happens to fall through. A significant part of many financial contingencies is that the buyer will be able to get back his or her earnest money — typically anywhere from 1% to 5% of the sale price, and put down as an indicator of seriousness — should the loan fail to be approved. Avoiding this financial risk may be in your best interest, although some buyers forego including a financing contingency if they’re confident their loan will go through or are competing with other potential buyers.
- Insurance contingency: This may be surprising, but some insurance companies have been known to reject applications from homebuyers in locations with a high risk of natural disasters, severe weather damage and proximity to toxic sites. It may be wise to include a contingency that allows the purchase to be completed only if you’re able to apply for and receive homeowners’ insurance.
If these contingencies are not already in the contract, look into adding them. As buying a home is a complex legal process, having an experienced attorney look over your contract is one of the best decisions you can make during the real estate purchasing process. This will help ensure you’re in the best position possible as the transaction moves forward.
BoltNagi is a widely respected and well-established law firm serving individuals, businesses and organizations throughout the U.S. Virgin Islands.