4 Standard Home Offer Contingencies
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There are a number of very important factors to consider once you reach the point of making an offer on the home. This includes considering making the offer contingent on one or more conditions. Contingency clauses are, in fact, very common when making an offer on a home. A buyer can include almost anything in a contingency clause, but there are some home offer contingencies that are more common than others. Here are a few home offer contingencies you may want to think about when making your offer to purchase a home:
Financing Contingency
A home buyer tends to include a financing contingency to ensure that they are able to secure a mortgage before the closing day to cover the cost of the purchase. Something can come up and prevent the mortgage loan from actually going through even though the buyer had been pre-qualified. The buyer is depending on financing unless they are paying in cash. They don’t want to be legally obligated to purchase a home if they can’t pay for it.
A financing contingency clearly protects the buyer, but the seller can also protect their rights by include provisions in these home offer contingencies. The seller might, for example, require the financing to be secured within a specific time period.
Inspection Contingency
An inspection contingency states that the purchase is good after the property has a satisfactory inspection by a certified inspector. This means that any potential problems in the home that were unknown will be noted before the home sale is complete. People don’t want to buy a home with serious defects. It’s in the seller’s best interest to know about problems and have the opportunity to repair or fix the problem early on. An inspection contingency, typically, gives the buyer the option to:
- Accept the home as is
- Require the seller to repair a problem
- Be released from the contract
Appraisal Contingency
An appraisal contingency makes the purchase based on an appraisal that is high enough to secure the financing. This lets both the seller and buyer know if the home is priced higher than the market. A lender will only loan a borrower a percentage of the home’s value in the current market. The buyer can back out of the deal if the agreed upon sales price is higher than the appraisal amount. The seller now knows they must reduce the price because buyers cannot obtain financing at the current list price.
Title Contingency
The most common home offer contingencies are producing a clear title. Numerous problems arise with the completion of a title search on a property. Some of these include liens against the property or easements recorded by the city or county. There are cases where the seller is unaware that there are obstacles to clear title. This is why a title contingency is beneficial to both parties.
For information about other home offer contingencies you may want to include in your offer, give us a call. We have helped hundreds of people make offers on their dream homes.