Buying a home is a major investment, so you want to rest assured the property you choose meets your expectations. One way to do so is through real estate contingencies, which are clauses that offer protection for certain conditions and circumstances.
Contingencies help you develop a real estate contract that is fair for all involved. They also offer peace of mind in case of an unexpected occurrence when buying a home. Here are a few common contingencies and how they work.
Home inspection
The home inspection is a crucial component of all real estate transactions. That is why so many contracts contain a contingency that gives the buyer option if there are major faults. The seller can make repairs themselves, or they can reduce the asking price to accommodate the cost of repairs. If the seller decides to do nothing, the buyer can walk away.
Mortgage
Even when you receive approval for funding, lots of issues can occur leading up to closing. If you no longer have access to a mortgage, you may lose your earnest money deposit when backing out of the deal. Mortgage clauses stipulate that you can cancel the contract legally if something happens to promised funding.
Appraisal
An appraisal clause allows the buyer to walk away from the deal when there is a disparity between the actual value of the home and your mortgage. If the actual value of the home you buy is less than the mortgage, there is a good chance the lender will pull funding. An appraisal ensures you know the accurate value and can invest in the property with confidence.
Mold
Mold is a major issue when buying real estate. Not only does it affect home fixtures like walls and ceilings, but it also degrades the air quality in your home. If you or a loved one suffers from allergies, you can experience symptoms like congestion, sneezing, and shortness of breath. Because mold remediation is often very costly, home buyers like to include a clause that gives them options upon the discovery of mold.
You can also design contingencies that address unique situations. They can cover pest infestation, title issues, and homeowners’ association processes depending on the characteristics of the property.
