Important Real Estate Contingencies When Buying a Home (Video)
What are Real Estate Contingencies?
Finding a home can become a bit stressful at times especially if there are some loose ends dangling. Things like repairs that need to be done on an existing home that needs to be sold or a possession date that is non-negotiable can cause headaches. That’s when something called a “contingency” can come to the rescue.
Inserting a contingency into the contract can keep you off the hook in the event things don’t work out as planned. A contingency is the clause in the contract that limits the obligations of the buyer should certain predetermine conditions not be met. Contingencies can cover almost anything you desire but the key is getting both sides to agree. Many are standard while others may push the envelope a bit.
Examples of Real Estate Contingencies
For example, a buyer often needs to sell their existing home before they are able to purchase a new one. This can be easily added to the offer as a contingency but the seller may balk at having their home tied up with a pending offer that could discourage other potential buyers who are able to close quickly. It all depends on market conditions and how long the seller is willing to wait.
Another common contingency – and a wise one – is requiring a home inspection. If major problems turn up such as trouble with the roof, basement, windows, or heating and air, the buyer can back out of the deal or renegotiate a better price with the seller.
If you’re not sure you can obtain financing but would still like to make an offer, you can make the deal contingent on getting a loan. The better your credit, the better the odds of the seller being willing to cooperate. A good way to avoid playing this card is to get pre-approved by a mortgage company.
Getting an independent appraisal of the home to be certain that its value supports the asking price is also a wise contingency. If the appraisal doesn’t support the price tag, you’ve got ammunition to go back to the bargaining table.
Request for Repairs
Having certain repairs done to the home can also be a contingency. Keep in mind that the higher the cost, the greater the likelihood of resistance. Home sellers usually set their price based on their home’s current condition.
An easy way to think of contingencies is to consider them bargaining chips – use them sparingly and wisely. And remember, there is no such thing as a verbal contingency. It must always be in writing as part of your offer to purchase.