When you walked into the home, it felt like home. From what you knew at that moment, you felt comfortable putting in an offer and committing to buying it. After the seller accepts your offer, the real work begins.
Buying a home is a big investment, and you want to make sure you know what you are purchasing and avoid any unpleasant surprises once you take possession of it. After you sign a contract to buy your dream home, you will go through several due-diligence steps before the home is yours. What happens if something goes wrong?
This is where contingencies come into play
When you negotiate your purchase contract, you can include terms in it called “contingencies” that give you the opportunity to back out of the purchase if one does not meet certain conditions. Below is a list of the most common contingencies used by home buyers:
- The home inspection contingency protects you if the home inspector finds something serious wrong with the house.
- The mortgage loan contingency protects you from losing your earnest money if you cannot obtain financing for the home.
- The home sale contingency protects you if you cannot sell your home within an agreed-upon amount of time — usually no more than 60 days.
- The home insurance contingency protects you if insurance companies will not provide you a policy for the home for some reason.
- The termite certification contingency protects you if termites infest the home.
If something happens that activates one of these contingencies, you do not necessarily have to walk away from the deal. For instance, if the home inspection reveals it needs expensive repairs, you could negotiate with the seller for a reduction in the sale price if you will make the repairs yourself. In the alternative, you could agree that the seller will make the repairs and you will go forward with the closing as long as the home passes another inspection.
Another contingency you may want to consider is for a clear title search so that the seller doesn’t leave you with with a piece of property you may not really own because something else can make a claim to the property. As you can see, contingencies provide you with a safety net should something go wrong with the purchase. Depending on your situation, you may want to include other contingencies. A thorough review of the situation by an experienced attorney could prove invaluable.