The Arizona Association of Realtors Residential Purchase Contract is full of contingencies that can allow a buyer to cancel the contract without losing their earnest money deposit. Five of the buyer contingencies in the contract are:
1. Inspection Contingency
The buyer has a home inspection period that begins upon a mutually accepted purchase contract. Typically the home inspection period is 10 days, however, it can be agreed upon in writing to be less or more days. During this time the buyer should inspect the home and complete all investigations. The seller will provide a seller property disclosure and an insurance claims report. After reviewing the information the buyer can choose to accept the property in its current condition, request repairs or cancel the contract and receive all earnest money deposited with the title company.
2. Repairs Request Denied
The buyer can request that the seller make repairs on the BINSR and if the seller refuses to make these repairs, the buyer can cancel and receive the earnest money.
3. Appraisal Contingency
The contract also includes a contingency for the buyer regarding the appraised value. If the property does not appraise for the agreed-upon purchase price then the buyer may cancel and receive the earnest money back. Of course, the buyer can try to negotiate the price down to the appraised value with the seller or come in with cash to cover the difference. Sometimes a combination of the two occurs.
4. Loan Approval--Unfulfilled Loan contingency
The buyer's offer is contingent upon the buyer receiving loan approval from the buyer's lender. If the buyer is not approved, the buyer can cancel the contract and receive the earnest money.
5. Final Property Acceptance--Final Walk Thru
The buyer has a right to a final walk thru before closing on the house. If the home has not been maintained by the seller or if it is not in the same condition that it was during the home inspection at the final walk-thru, the buyer can cancel. One example would be if the seller removed light fixtures or ceiling fans, or if the A/C won't turn on. The buyer can give the seller the opportunity to correct these items.
In addition to these five contingencies, the buyer also gets to review the Seller Property Disclosure Statement, the HOA CC&Rs, as well as, the title commitment report. The buyer must notify the seller if they disapprove of any items in these documents and could potentially cancel if they choose.
