by Amar REALTOR® | July 11, 2022 5:05 am
Real Estate Contingencies when You’re Buying Home
When you’re in the process of buying a home, there are a lot of different things that can come up that can either make or break the deal. One of these things is known as contingency. Contingencies are conditions that must be met for the value to go through.
There are a lot of different contingencies that can come up in a real estate deal.
Common real estate contingencies
In any real estate transaction, it is common for buyers to include contingencies in their offer. A contingency is a condition that must be met for the sale to go through. Some common contingencies include the buyer obtaining financing, the Home passing an inspection, and the seller clearing up any title issues.
Disclosure contingency
In a real estate contract, a disclosure contingency is a condition that must be met before the sale can be completed. The most common type of disclosure contingency is the seller’s disclosure, which allows the buyer to know more about the property from the seller’s point of view.
Disclosure contingencies are typically included to protect the buyer’s interests and are often negotiable depending on the situation.
Inspection contingency
An inspection contingency is one of the most important home buying aspects. This contingency allows the buyer to inspect the property professionally to look for any major defects or needed repairs. If the inspector finds any significant problems, the buyer can renegotiate the purchase price or back out of the contract entirely. Many buyers choose to waive this contingency to save money, but doing so is risky. Unless you are familiar with home construction and repair, avoiding caution and including an inspection contingency in your offer is best.
Appraisal contingency
One common contingency included in real estate purchase agreements is an appraisal contingency. This contingency gives the buyer the right to back out of the deal if the property is appraised below the agreed-upon purchase price. The buyer may ask the seller to lower the purchase price to match the appraised value. An appraisal contingency is typically included to protect buyers from overpaying for a property. However, it can also lead to delays or even the cancellation of a sale if the appraisal comes in low. As a result, it’s important to weigh the pros and cons of including an appraisal contingency before entering into any real estate transaction.
Financing contingency
Contingencies are a common feature of real estate purchase agreements. A contingency gives the buyer the right to cancel the contract if certain conditions are unmet. The most common type of contingency is the financing contingency, which allows the buyer to back out of the deal if they cannot secure financing.
While a financing contingency can protect the buyer from being stuck with a property they can’t afford, it can also create problems. If the buyer cannot obtain financing, the seller is left looking for a new buyer when the market may not be favorable. As a result, sellers often require buyers to waive their financing contingency before accepting an offer. For buyers, this means assuming greater risk but also giving them a better chance of closing on the property.
Home sale contingency
A home sale contingency is a clause often included in a real estate contract that specifies that the sale of the buyer’s current Home must be finalized before the purchase of the new Home can be completed. This contingency gives the buyer a specified amount of time – typically 30 to 60 days – to sell their Home and finalize the deal. If the buyer cannot sell their home within this timeframe, they may leave the agreement without penalty.
While a home sale contingency can provide peace of mind for buyers, it can also be a major obstacle for sellers. In a hot housing market, buyers with a home sale contingency may find themselves at the bottom of the pile when competing against all-cash offers or buyers without this contingency. As a result, sellers should carefully consider whether or not to accept a request with a home sale contingency attached.
Homeowners association contingency
Homeowners Association (HOA) contingencies are often included in real estate contracts. This contingency gives the buyer a period to review the HOA’s governing documents and ensure they can meet the financial obligations of membership. If the buyer is unsatisfied with the HOA’s governing documents or cannot meet the financial obligations, they may cancel the contract and receive a full refund of their deposit.
While an HOA contingency can protect buyers from committing to an HOA that is not a good fit for them, it is important to note that this contingency may also put the buyer at a disadvantage in a competitive market. Sellers may be reluctant to accept an offer with an HOA contingency, as it gives the buyer an easy out if they have second thoughts about the purchase. As a result, buyers should carefully consider whether an HOA contingency is right for them before making an offer on a property.
A real estate contingency is a condition that must be met for the sale to go through. Common contingencies include the buyer’s ability to secure financing and the Home passing a home inspection. A real estate contingency gives the buyer a way to back out of the sale if the condition is not met, and it gives the seller some peace of mind that the deal will go through. Amar Realtor can help you navigate the world of real estate contingencies and ensure that your sale goes through without a hitch.
Resources
https://www.dre.ca.gov/
https://www.hopb.co/california
https://oag.ca.gov/consumers/general/homeowner_assn
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