Contingencies to Consider When Putting an Offer on a Home
Contingencies are important regardless of whether you’re a first-time homebuyer or a seasoned pro. Although technically you can add any type of contingencies into your sales contract, it is up to the seller to agree to the terms. Below are some of the most common contingencies that sellers see from prospective buyers:
Home Inspection Contingency
It is highly recommended to always have a home inspection done on the home where a certified home inspector looks at every aspect of the home, from the roof to the structure and everything in between. You are making a large financial decision and you want to make sure the home is sound. Otherwise it could result in a large financial hit that is unexpected and possibly make the home unaffordable. By placing a home inspection contingency in the contract, you have the option to back out of the sale of the home if there is something majorly wrong with the home.
In this section, we will discuss 5-part contingency. First being an appraisal contingency – you do not want to spend more on a home than you can afford and really want to. Ideally, in these situations, you would want the home to appraise at the listing price or higher in order to guarantee lending. With an appraisal contingency, you can back out of the home if it appraises lower than asking. Going hand-in-hand is adding a financing contingency that would allow you to back out if you cannot secure lending and piggy-backing off of that, is a home sale contingency. Meaning, if part of your finances to secure funding of your new home is dependent on selling your old home, you can add the home sale contingency to help secure the home of your dreams while working on selling your previous home within an allotted time. Having two mortgages is not ideal.
Home insurance is required by lenders when a home loan is approved. This covers accidents to the home if a water pipe bursts, or a major storm comes and damages the home during the transition of when the seller moves out but before the buyer moves in. Additionally, in many instances, homeowners associations require approval of buyers. Adding an HOA contingency protects you, as a potential buyer, to back out if for any reason HOA does not approve your application to move into the community. This also allows for the buyer to back out of the sale of the home if once the HOA packet is received and items are not agreeable for the buyer.
Clear Title Contingencies
Probably one of the more important contingencies – making sure the title of the home comes back clear and that the seller is verified as the sole owner and can legally commitment to sale of the home.
Remember, making contingencies is your purgative but keep in mind more reasonable contingencies can help your offer stand out positively amongst other potential offers. If you have any questions, please reach out to a local real estate agent or lender. As always, you can contact the Jen Martinez Team for any questions you may have.