Buying a home often evokes a mixture of emotions. Submitting your offer can be very exciting, especially after you have seen that one home that you really, really want. Quite often, time is of the essence when you are completing the contract that you will submit but there are several contingencies that you will want to consider carefully to protect yourself and your deposit.
The Financing Contingency indicates to the seller that you can only complete the purchase if you are able to obtain financing. This protects you in the event you have trouble getting approved for a mortgage or obtaining an interest rate that is acceptable to you. There may be one or more time-based deadlines associated with this contingency. For example, it could state that you have a fixed number of days to present a Loan Commitment from your lender or the seller has the right to void the contract and find a new buyer.
Home Inspection Contingency
It is always recommended that the buyer hire a professional to perform a home inspection prior to purchasing a home, even if the home is brand new. A home inspector will inspect the entire home and all its core systems to determine if they are functioning properly and if there are any observable maintenance or repair issues. A typical Home Inspection Contingency will provide just a few days after the contract is signed for the buyer to obtain the inspection. If there are any issues on the report, you have the right, within the timeframe of the contingency, to attempt to negotiate terms to fix the issue or terminate the contract altogether.
Home Sale Contingency
If you currently own a home that you want or need to sell before you purchase a new one, you may offer a Home Sale Contingency. As the name suggests, this contingency gives you the right to cancel the contract if your home does not sell within a certain amount of time. Obviously, this contingency places a lot of risk on the seller and will likely be a significant factor in the seller’s decision to accept your offer.
Nearly every contract has an Appraisal Contingency that states that the buyer’s offer is contingent on the property being evaluated by a professional real estate appraiser and found to be valued at or above the agreed upon sales price. If the appraiser’s report indicates that the home is worth less than the sales price, the contingency gives you the right to renegotiate with seller or cancel the contract. As with the others, there is typically a fixed amount of time to exercise the contingency.
Assuming you are working with a Realtor, they will be able to guide you through these contingencies. Some of them are more common than others and will impact the favorability of your offer. Also, remember they are all negotiable so be sure to check them to see if any of the terms were changed as part of the seller’s counteroffer.