3 contingencies you may want in your offer to buy a home
You have a lot to gain and also potentially a lot to lose when buying residential real estate. For example, you might offer more money than you should for a property that needs extensive work, meaning that you end up losing money on the transaction rather than earning money when you eventually sell the home again.
Obviously, you want to make the best offer possible based on your current circumstances and the condition of the property. However, you also want to protect yourself so that you don’t get into financial trouble because you wanted to buy a new home.
Contingencies remove your financial and legal risk if you cancel the closing in accordance with the terms included in your offer. You will not have to worry about losing your earnest money if your contingencies protect you properly. Including the three contingencies below in your offer will help protect you as you move forward with the transaction.
A home sale contingency
Perhaps one of the biggest risks involved in buying a new house is the risk that you won’t be able to sell your current home quickly or for the price that you need to afford the new property.
Making an offer contingent on the sale of your existing property and perhaps listing a minimal sale price allows you to potentially cancel the closing after the seller accepts your offer if you are not able to sell your current residence.
A financing contingency
Perhaps, the week before you go to closing, your spouse loses their job. All of a sudden, the mortgage company that pre-approved you months ago can no longer underwrite your loan.
A financing contingency allows you to cancel the closing when you can no longer obtain a mortgage for the property. An appraisal contingency is a related form of contingency that might allow you to cancel the purchase if the appraisal comes in lower than the amount of financing you need to buy the home.
An inspection contingency
Although you and your real estate agent may have looked closely for signs of defects, it takes a professional to find hidden and latent defects. If an inspector discovers an issue that will cost thousands of dollars to correct, you may want to reduce what you offered for the property or walk away from it.
Understanding and including the right contingencies in your offer when purchasing Real Estate Attorney will allow you to minimize what is at risk during the transaction.