Saving money for a down payment on a home is no easy feat, which is why I started looking into various ways to make sure that I had things sorted out like I should. I began working with a real estate agent to chat about what to do and how to start saving, and they explained how much I needed if I wanted to avoid private mortgage insurance, and when the market typically trended upwards. It was really neat for me to see everything I could do with the advice, and saving became easier after I had a clear goal. Find out more about real estate by reading this blog.
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Home Buying Contingencies? 3 Things Homebuyers Should Know
Cathy Frazier
The early real estate contracts that were used many decades ago were brief, single-page documents with only basic information. As time passed, these documents have been modified many times, with today's contracts including a multi-page purchase offer, as well as disclosures and several additional documents.
One important improvement that has come about by modifying and improving the standard real estate contracts is the inclusion of contingencies that can help buyers and sellers address and customize financing, inspection, appraisal, and other important aspects of the transaction. Contingencies can help buyers enjoy a better buying experience, if used correctly. If you are in the planning stages of buying a home, here are three things you should know about using some of the most common home buying contingencies.
The appraisal contingency
While most sellers work with a listing agent and consider statistical information about comparable properties to help them set a list price that falls into line with their home's current market value, it is not uncommon to find homes that are priced higher than they should be. The appraisal contingency provides insurance that buyers are not overpaying and is based on the findings of an independent, licensed real estate appraiser. When the purchase offer is contingent upon appraisal and the home is found to be worth less than the purchase offer amount, buyers have the option to renegotiate price or dissolve the transaction without losing their earnest money deposit.
The financing contingency
If the buyer's offer is dependent upon getting a mortgage, a finance contingency offers them protection from consequence should loan approval not be given. Buyers who feel their lender pre-approval is solid should still include a financing contingency, just in case an unexpected issue arises that might prevent them from successfully obtaining their mortgage.
The inspection contingency
An inspection contingency is also extremely important for buyers, even if the home seems to be in very good condition. Unexpected repair issues and hidden defects can arise in any home purchase transaction. With an inspection contingency in place, buyers are allowing themselves to have the opportunity to perform any inspection they choose, including, but not limited to:
- home or structural inspections
- water well and septic inspections
- electrical, roofing, plumbing, and HVAC inspections
- foundation inspections
- lead-based paint and radon inspections
With an inspection contingency, buyers are able to reopen negotiations with the seller, based on any unsatisfactory inspection reports they receive on the home.
Determining which contingencies you need, as well as using them to successfully renegotiate your purchase agreement is best done by working with a skilled, caring real estate agent in your area.
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