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Two Type Of Contingencies, and Why You Need Then When You Buy A Home

By
Real Estate Agent with Russell and Jeffcoat

 

When you find your dream home, make an offer and the offer is accepted, the next step is to sign a purchase and sale agreement. A purchase and sale agreement is essentially a guarantee to the sellers that you’re going to buy the home, and stipulates the timeframe and the terms of the sale. You typically don’t have all the information when you make an offer, so your purchase and sale agreement should contain some contingencies to give you a loophole if you need it. 

The Two Types of Contingencies

Two main issues come up after reaching the purchase agreement phase: financing and property inspections. If you have trouble getting financing, you’ll want a financing contingency that says you’re not obligated to buy the home if you can’t get the financing. However, if you’ve reached the buying phase, you’re probably already pre-approved and you should have a good idea that you can obtain financing. The property inspection contingency, then, is potentially more vital.

Why You Need a Property Inspection Contingency

When you decide to make an offer on a home, you’ve generally only walked through the home once or twice and have only the information that the seller has provided. Most people aren’t trained property inspectors, so you may be able to spot obvious issues but more innocuous problems can escape your notice. This is why you need an inspection contingency.

After you’ve made an offer, you should hire a property inspector to come and take a look at your new dream home. If the inspector spots something that is a big problem with the property, a contingency might let you re-negotiate the deal or get out of the deal entirely. If the home has major structural issues or serious systems with the heating and cooling, plumbing or electrical systems, getting out of the deal might be the best thing you can do.

Make sure you have the right contingencies in your purchase and sale agreement to protect you in the event that you have trouble with financing or the inspection.



Comments (2)

Mike Schneider
10 YRS with Active Rain ! - Lake in the Hills, IL
ABR, CDPE, SFR

great advice....The entire contractual process should be  orchestrated with the least "risk" factors and the easiet "exit" strategies. "just-in-case"////   thansk for sharing...enjoy the week end.

Dec 08, 2011 11:57 PM
Linda Edelwich
William Raveis Real Estate - Glastonbury, CT
Serving Glastonbury & Beyond | 218 New London Trnk

Good points. Our GHAR board contracts have those contigencies built right into the agreements.

Dec 09, 2011 12:02 AM