How to Navigate Real Estate Contingencies Successfully: Tips for Homebuyers
Understanding Contingencies: Consumer Protection
A contingency is a condition that must be fulfilled before a real estate contract becomes legally binding. These clauses serve as contingent upon certain events occurring or specific requirements being satisfied. By adding contingencies into their offers, buyers can prevent potential risks and protect themselves from unforeseen circumstances that may arise during the process of purchasing a property.
How do Contingent Offers Work?
When you're buying a house, you might come across what's called a "contingent offer." This means the sale hinges on certain conditions being met. These conditions, known as contingencies, have to be satisfied before the deal can go through. If they aren’t, the contract falls apart. Contingencies are basically there to protect the buyer from potential problems that could pop up during the home-buying process.
What are the Most Common Contingencies?
When you're ready to make an offer on a property, you can set certain conditions—known as contingencies—that need to be met before the sale is a done deal. These conditions can vary based on your specific needs, but here are some common ones you might consider:
Home Inspection
When buying a home, you might include a home inspection contingency in your offer. This lets you evaluate the property's condition and decide if any repairs or renegotiations are needed. If issues come up, you can ask the seller to lower the price or fix the problems before moving forward with the purchase.
Mortgage Contingency
A mortgage contingency gives homebuyers a set period to secure a mortgage loan. If they can't get the loan in that time, they can back out of the deal without any legal hassle and even get their earnest money deposit back.
Appraisal Contingency
An appraisal contingency lets buyers cancel the deal if the home appraises for less than the agreed price. This is particularly helpful for those using financing or in areas with fluctuating home prices. If the appraisal comes in low, buyers can walk away from the agreement without penalty.
Title Contingency
The title of a home shows who owns the property and its ownership history. A title contingency in your offer means the sale depends on the property having a clear title with no liens. You get to review a title report that details the home's ownership history before finalizing the purchase.
Home Sale Contingency
If you need to sell your current home before buying a new one, you might add a home sale contingency to your offer. This means the purchase of the new home will only go through if your current home sells first. While this offers protection for you as the buyer, be aware that in a seller’s market, sellers might reject this contingency since they could get offers from buyers without this requirement.
Can You Put an Offer on a Contingent House?
Yes, you can still make an offer on a house that's listed as contingent. This means the seller has accepted an offer, but the sale isn't final yet. By making an offer, you’ll be in line as a backup if the original deal falls through.
What Is a Kick-Out Clause in Real Estate?
A kick-out clause lets the seller accept a contingent offer while still considering other offers. If a better offer comes in, the seller can "kick out" the original contingent buyer and go with the new one.
What Does Contingent No Kick-Out Clause Mean?
A contingent no kick-out clause means the seller can't accept other offers while waiting for the original contingent offer to go through. The seller must wait until all conditions are met or the original buyer backs out before looking at other offers.
These were some common contingencies that you may come across as you try to buy or sell a home. If you would like more information, contact the trusted Realtors at Locations, Inc.
