The standard home contract includes a few conditions that must be met before the closing can occur, covering issues like financing, insurance, inspections, and that’s only the tip of the iceberg. These conditions are called “contingencies.” They’re critical to give you an out if, for instance, your financing falls through or other situations or disclosures make obstructions to you closing the deal.
Keep in mind, purchasing a house isn’t like going to the store and buying a refrigerator, where you can return it inside of 30 days in the event that you don’t care for it. When the arrangement is done, it’s essentially done. So, along with making a great offer and taking advantage of real estate rebates (when available), it is worth exploring whether you’re making the best decision and making contingencies permitting you to make these exemptions before the sale is concluded.
How Do Contingencies Work
A few possibilities are very standard, and both seller and buyer would most likely be crazy to reject them. For instance, a purchaser’s has the right to an inspection. You condition the closing on accepting the reports from the home inspectors whom you contract.
A finance contingency is common, conditioning the sale on the seller and buyer, on securing a loan with which to purchase that house. While it was assumed buyers would get the loan, especially if they had pre-qualification or a pre-approval letter from a bank, home buying credit has really tightened up, and many loans fall through during the last minute. Sellers now favor buyers who make cash offers, leaving out the financing contingency, or at prove to sellers’ satisfaction they can secure qualification.
Buyers add insurance contingencies to home buying contracts. Homeowners living in certain states with a history of mold, fires, earthquakes, tornadoes, or hurricanes, could receive flat out no coverage response from many insurance carriers. Home buyers and sellers can make the contract contingent on applying for and then receiving insurance in writing.
Many other contingencies are less the normal, and become a matter for negotiating at the table. For example, the home seller could ask that the contract be made contingent on successfully buying a different house. If you need to move out of the house quickly, you could reject the contingency or ask for a time limit. Also, you could request the deal is contingent on you successfully selling the house; but in slower markets, where it could take you a long time to sell, the seller is liable to walk at this point.