When you buy a home, you start by making an offer to the seller. It can be for any amount that you’d like (although going too far below the asking price is unlikely to get you a response).
But an offer is about more than just the price. You can also put in contingencies — or choose to leave them out — that will dictate how the offer applies. What are these real estate contract contingencies and why do they matter?
A contingency is a condition that must be fulfilled
The easiest way to think of a contingency as a condition. Such conditions have to be met for the offer to stand. You’re not just offering the seller $200,000 for their house “as-is.” You’re offering $200,000 if the house meets these contingencies.
Two of the most common contingencies are that you must secure financing and that the house has to pass inspection. If you can’t find a mortgage lender who will give you the money, or if the home fails the inspection — or both — then you can walk away from the sale. There is no penalty for doing so, as that is how your contractual offer was laid out the entire time.
In some cases, people abandon all contingencies. The only real reason not to include them is that some buyers are more likely to accept an offer without contingencies. This can work in your favor if there is a lot of competition.
Understanding the home-buying process
It’s important to know how the home-buying process works. An attorney can help you understand what steps you will need to take and help protect your interests (and your money) throughout the process.