Buying a home is one of the most important decisions you’ll ever make. It involves a lot of money, time and emotions, so you want to ensure that you are protected from any unforeseen issues that might arise during the process. Contingency clauses can help you do that.
A contingency is a condition of the sale agreement that needs to occur for the transaction to proceed. Contingency clauses provide essential protections and flexibility throughout the transaction process by allowing you to back out of the deal or renegotiate the terms under certain circumstances.
Common home-buying contingencies
Several types of contingencies can be added to a real estate contract. Some of the most common contingency clauses include:
- Financing contingency allows you, the buyer, to cancel the contract if you cannot secure a mortgage loan within a specified time or with favorable terms. This way, you won’t have to buy a home you can’t afford or pay a higher interest rate than expected.
- Inspection contingency permits you to conduct a thorough inspection of the property and request repairs or a price reduction if you find major defects or significant issues with the property that may affect its value or livability.
- Appraisal contingency allows buyers to cancel the deal or renegotiate the purchase price if the property’s appraised value falls short of the agreed-upon price.
- Home sale contingency is for buyers who need to sell their current home before purchasing the new one. It allows you to cancel the contract if you cannot sell your home within a specified time or with certain terms. This way, you won’t have to buy a new home before selling your old one or carry two mortgages at once.
- Title contingency ensures the property has a clear title with no third-party claims before the deal is closed.
Contingency clauses can help you avoid costly mistakes when buying your dream home. The essential safeguards and wiggle room they offer can protect your legal and financial interests. Learning more about how they work and the clauses you should include in your real estate contract can make all the difference in your home-buying experience.