Posted on: 8 December 2020
The search for a home can be fun, but things get more serious when you make an offer. This offer to purchase a home is a contract and you are entering into a legal agreement to purchase the home. One of the most confusing aspects of a contract is contingencies, so read below for a simple explanation that will make things more clear.
What Is a Contingency?
Having contingencies in a contract to purchase a home is a good thing. If the contingencies are not met, it gives buyers a way out of the contract. Contingencies in a real estate contract are a list of items that have to be resolved before the closing date. For example, a common contingency is that the buyer obtains financing. If that doesn't happen, the buyer is off the hook for the purchase contract. Take look at some other common home purchase contingencies.
Another very common contingency is that of the home inspection. A professional home inspection could uncover previously unknown repair issues that could cost thousands to fix. Most buyers are willing to cope with minor problems like a cracked window or a minor leak, but when the inspection reveals a major issue, you have the right to back out of the contract and move on to the next home.
A professional appraisal is the lender's way of making sure they are lending money for a home that is worth the mortgage amount. No matter how much you think the home is worth, the appraisal has to come in at or below the amount of the mortgage or the sale is potentially off. The only other way to cope with this discrepancy is to ask the seller to lower the price of the home or to pay the difference using a down payment.
Home Title Searches
It's common practice to have a title search firm conduct a title search on a home. The search involves looking at all past and present owners and making sure that there are no encumbrances on the title. That means there are no ownership disputes, liens, or other issues. You probably need to walk away from a home with title problems.
The above is only a sampling of the contingencies that might show up on your contract. You can add any that you like to the contract. Keep in mind, however, that sellers don't like to see too many contingencies and they might not agree to the offer because of them. To find out more about contract contingencies, speak to your real estate agent.
For more home buyer information, contact a real estate agent today.Share