Buying a new home can feel overwhelming, especially if it’s your first time. There are so many details, from the first viewing until the final closing, that you may begin to worry about forgetting something.
One crucial aspect of buying a home is including contingency clauses.
Protection for the buyer
In real estate transactions, contingency clauses outline certain criteria that must be met before the closing. They protect the buyer by allowing them to exit the contract if certain things pass.
Here are three common types of contingency clauses:
- A financial contingency clause allows the buyer to back out of the deal if they can’t secure the funding for the purchase.
- Inspection contingencies give the buyer the right to have the property inspected before closing. If there are major problems, the buyer can negotiate the repairs with the seller or withdraw from the contract. This clause protects the buyer from being stuck with costly repairs soon after purchasing the home.
- An appraisal contingency states that if the property is appraised at lower than the agreed-upon purchase price, the buyer can choose to try and renegotiate the price or end the contract. However, it’s important to note that properties are often listed and sold at prices higher than their appraisal in a seller’s market.
Many home buyers don’t know about contingency clauses and may end up in a home where they’re over their heads financially or where they need to carry out significant repairs. Having a knowledgeable person working with you every step of the way helps ensure the home of your dreams doesn’t become a nightmare.