4 Common Home Buying Contract Contingencies
When one is looking to place an offer on a property, it is important to understand what type of contingencies are common when purchasing a home. Contingencies, are actions that must be met in order for a contract to become binding. Both the seller and the buyer must consent to these conditions, and a “contingency clause” included in the real estate contract makes it official. Here are 4 common contract contingencies to be aware of when buying a home.
Mortgage Contingency
The majority of home buyers will need to obtain a mortgage to purchase a home. A mortgage contingency is a condition written into a real estate purchase contract that the buyer indicates must be met in order for them to close on the purchase. Buyers use these contingencies in order to protect themselves in case they can’t qualify for financing and can’t afford a property without a loan.
Inspection Contingency(ies)
It’s recommended that when buying a home, you have a home inspection. There are many different inspection(s) contingencies that may be included in real estate contract. Beside the standard inspection contingencies can also include, mold inspection, pest inspections, radon inspection, lead inspection, chimney inspection, and well and septic inspection.
Home Sale Contingency
A common contingency is the Home Sale Contingency clause. This contingency indicates to a seller that the buyer has an existing home that needs to be sold prior to purchasing the subject property.
In a seller’s market, home sale contingency may not be advisable. If there are multiple interest in the property and one buyer makes an offer on the home without a home sale contingency and another interested buyer makes an offer with a home sale contingency, the seller will most likely take the offer without this contingency. There could be a case where the seller themselves are trying to time their move from one house to another and a home sale contingency is fine.
Appraisal Contingency,
Another common contingency is the Appraisal contingency that protects the buyers by making sure that the buyers are paying fair-market value for their dream home. Appraisal Contingency protects a buyer from overpaying for a property.
The four (4) above contingencies are the most commonly found in real estate sale contracts. When buying a home be aware of these and if you’re unsure what they really mean, ask your real estate agent or an attorney.
What contingencies do you feel are commonly found in real estate transactions?
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