Some things in life provide the “you’ll know it when you see it” feeling. Just ask any woman who has shopped for a wedding dress. You also get that sensation when you find the perfect house.
It’s hard to contain your excitement when making an offer, but it’s essential to be practical, including adding contingency clauses to your offer.
What are contingency clauses?
Contingency clauses are specific conditions that must be met before a real estate transaction closes. These clauses are usually included in the purchase agreement to protect the buyer and allow them to back out of the deal or negotiate the terms if the conditions aren’t met.
Common types of contingency clauses include:
Financing: Allows the buyer to cancel the offer if they are unable to secure a mortgage
Inspection: The buyer can have the property inspected and withdraw or renegotiate if there are significant issues with the house or property
Appraisal: If an appraisal comes in lower than the home’s sale price, the buyer can negotiate the deal or walk away.
Home Sale: This clause makes the sale contingent on the buyer’s ability to sell their home.
Title: The buyer can back out if the seller can’t provide a clear title.
Contingency clauses in a real estate agreement have pros and cons. Buying a home is likely one of the most significant financial decisions you will make, and contingencies help to protect your investment. They give you the flexibility to negotiate or walk away.
However, there is also the risk that a seller may pass over a bid with multiple contingencies in favor of a less complicated, no-contingency offer.
While it’s essential to protect yourself and your money, you also need to consider the market and how much competition you have for your dream home. Real estate deals are complicated; therefore, you need to work with someone who can help you review your options and feel comfortable with your decision.