Real estate transactions are a major investment. For some people, these transactions are the largest they ever deal with. Most commonly, as part of the process to purchase a home, the buyer makes an offer. If the offer is accepted by the seller, the two parties enter into a purchase contract.
There are several terms that are included in a purchase contract. Some of these are contingencies that provide protections for the buyer.
Common contingencies
The home inspection contingency is one of the most common contingencies that is included in a home purchase contract. This is set as an assurance that the buyer is getting a home that’s in the condition that’s represented by the seller.
If a home inspection unearths issues that weren’t disclosed by the seller, the buyer can ask the seller for concessions or to fix the problems. If the seller won’t do either of these, the buyer has a chance to walk away without any consequences.
Another common contingency has to do with financing. If the buyer can’t obtain the mortgage as intended, they can walk away without losing their earnest money. The appraisal contingency goes hand-in-hand with the financing contingency. This one goes into effect if the home appraises lower than the agreed upon sale price.
In some cases, there is a home sale contingency that makes the home purchase contingent upon the buyer being able to sell the home they currently own. This is often used when the buyer needs to have the proceeds from that same to move forward with the purchase.
Contingencies in real estate usually come with time limits, and some may have other criteria. It’s critical that anyone who wants to purchase a home understands exactly their options for protecting their interests, given all that is at stake.