By Jesse McCarl
Home contingencies can make all the difference in a real estate transaction. A contingency means the seller has accepted an offer on the property, but success of the sale may still depend on certain clauses. These clauses usually fall under three categories: passing a home inspection, securing financing, and the legal ownership of the property. Contract contingencies are often called “a buyer’s best friend,” but there are a few contingencies that help protect the seller as well.
In today’s infographic, we take a look at the most common home contingencies you’ll see in a real estate contract.
Home inspections are the most common home contingency. Basically, a buyer is freed from their offer contract if the home can’t pass an inspection.
- First, buyers get to choose the home inspectors. There may be a few different inspectors necessary. For example, the pest inspection is different from the home inspection itself. The buyer (/buying agent) have power to decide who checks these things.
- It’s smart to include a disclosure contingency. If you move in and find the seller didn’t disclose a pre-existing contingency, it can free you from your contract.
- If anything doesn’t pass inspection, or if it just isn’t up to the buyer’s standards, s/he can demand repairs.
- The general home condition can be a contingency. Even if it passes inspection, you may know it needs a fresh coat of paint. The buyer can demand that service, or take off the cost of painting from the price of the home.
No one wants to make (or sell) a big investment if they’re not financially ready. More importantly, sometimes their finances really shouldn’t allow a major transition. Financing clauses protect buyers and sellers from getting ripped off.
- In a buyer’s market, the buyer may include a contingency that the purchase of the home is dependant upon him/her being able to sell the current residence.
- The buyer can clarify that the purchase is based upon them being able to secure an acceptable mortgage rate.
- In a seller’s market, the seller can include a contingency that the purchase of the home is only possibly if they find and secure their next residence.
- Sometimes a certain amount has to be covered in the down payment. The seller has the right to demand something higher than 20%.
- The seller can (and absolutely will) retract the offer acceptance if the buyer’s loan isn’t approved. Usually this does not need to happen because the buyer has to be pre-approved.
Believe it or not, there are a lot of ways ownership of a property can be disputed. The last thing any buyer wants is to make a massive down payment and then learn it was all a scam.
- Sale of the property depends on buyer’s ability to find homeowner’s insurance.
- Seller can prove full ownership over the property.
- The buyer chooses the title company.