A contingency is a clause, a contractual requirement that must be fulfilled before the home sale transaction can close.
Contingencies to purchase offers also give you an out, the opportunity to cancel the contract without financial penalty should certain undesired scenarios play out.
You won’t lose your earnest money, if you cancel because the seller didn’t meet a contingency.
- Among the most common contingencies is for consumers who are simultaneously selling a home and buying another. The contingency allows the buyer to sell the current home before purchasing another. Writing this contingency into an offer protects you from being stuck with two mortgages, a potentially huge financial burden.
- The financing contingency is another common contingency often included. It says you must secure financing for the new home.Many sellers in today’s market won’t even look at an offer that doesn’t come with some proof of financing.While this contingency may appear to be moot you, you should still include the clause just in case your mortgage approval falls through.
- Other common contingencies require that the property appraise for the amount you are offering to pay, and that the house pass a variety of home inspections,
- Also consider a title contingency which ensures that the seller is indeed the true owner of the property.
- An insurance contingency guarantees that that you will be able to secure home insurance for the property.
- Some homebuyers may wish to include other contingencies based on property features, say requests for repairs on known problems with the property.
- A “neighborhood contingency” allows you to research the neighborhood to determine its suitability.
Contingency balancing act
Remember, in a hot real estate market, a seller could receive multiple offers simultaneously. The seller will evaluate all offers and choose the most attractive deal.
If an offer contains too many demands or contingencies, that buyer will likely lose out.
Beyond contingencies, buyers should include an expected closing date.
The date can be somewhat flexible, but with a date in mind, you and the seller can plan your moves, avoid storing belongings between homes, and make all the preparations necessary for a change of possession.
Your real estate agent can help you draft the contract with standard forms approved by their state and real estate association.
By crafting a solid offer, you will increase the likelihood that you will soon live in your dream home.
– by Lillian Montalto
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