Important Contingencies You Should Know as a Buyer
If you are in the market to buy a property, it’s important to familiarize yourself with the essential contingencies that come with real estate transactions. Real estate contingencies are conditions that must be met before closing the sale of a property can occur. These contingencies are part of the negotiation process between buyers and sellers and are designed to protect both parties. In this post, we’ll discuss some of the most critical real estate contingencies that you as a buyer should be aware of.
One of the most important contingencies in a real estate transaction is the financing contingency. This contingency allows the buyer to back out of the contract if they fail to obtain the necessary financing to purchase the property. The contract typically specifies the type of financing required, the loan amount, and the interest rate. If the buyer is unable to obtain financing per contract terms, the sale falls apart.
The inspection contingency allows the buyer to have the property inspected by a licensed inspector to determine its condition. If significant issues arise during the inspection, the buyer can request repairs or back out of the contract. This contingency is critical since it protects buyers from purchasing a property that may require significant repairs and/or investments that they are not prepared to make.
The appraisal contingency protects buyers from paying more for a property than it’s worth. An appraisal is an objective evaluation of a property’s value by a licensed appraiser. If the appraisal comes back lower than the agreed-upon purchase price, the buyer may elect to renegotiate the purchase price, withdraw their offer or walk away from the deal altogether.
The title contingency is a crucial part of real estate transactions since it protects buyers from purchasing a property with undisclosed title defects or liens. The title company performs a search on the property’s title to ensure it’s free of issues that could affect the sale. If any title defects or liens arise, the buyer may request that those issues be resolved before closing, renegotiate the terms of the sale if possible, or walk away from the deal altogether.
Home Sale Contingency
Another essential contingency is the home sale contingency. If the buyer needs to sell their current property to be able to purchase the desired property, they can insert a home sale contingency into the offer. Essentially, this contingency offers the buyers a specified period to sell their existing home, and if they fail to do so, they can back out of the purchase bid without penalty.
In conclusion, real estate contingencies are critical components of any real estate transaction, offering buyers adequate time to evaluate all aspects of the property deal and ensuring they find a desirable property. As a prospective buyer, it’s essential to understand the various contingencies and how they benefit you in the buying process. If you are not familiar with these conditions, be sure to hire a reliable real estate agent or attorney to provide you with the necessary guidance and ensure a smooth and stress-free purchase process