What Are Contingencies?
When A is contingent upon B, it means that A will only happen if B does. In a real estate purchase agreement, including contingencies means that your offer will only remain valid if certain conditions are met. This allows you to back out of the agreement if other parts of the process fall through or reveal information that changes how you feel about the purchase.
Common Contingencies To Include
There are several different types of contingencies that may be included in your home purchase contract. Here are a few examples of some of the most common ones.
The home inspection is a critically important part of the home buying process. During the inspection, a professional inspector will thoroughly evaluate the home from top to bottom, inside and out. If the inspection report reveals something that is not up to code, in poor condition, and/or requires extensive and costly repairs, you may not wish to purchase the home as is. This contingency may allow you to negotiate the repair into the sale or potentially back out of the agreement entirely.
Even if you already have a pre-approval letter from your mortgage lender, the financing will not be official at the time that you submit your offer. While it may not be likely, there is always a small chance that something will fall through and you may not be approved for your loan. If you are not able to get the financing required to purchase the home, this contingency will allow you to back out of the sale.
When you submit an offer, you will have to specify which title company you would like to handle your transaction. The title company will then conduct a title search to identify any potential issues with the title. In some cases, issues may be revealed that you don't want to deal with. The current owner may have an ex-spouse who still has some claim to the title, for example, or you may learn that the person trying to sell the property actually has no legal claim to the title. The title report may also reveal any outstanding liens that need to be resolved.
House Sale Contingency
If you have a current home that needs to be sold before you can purchase a new one, you may want to include this contingency. If your ability to purchase your new home will be dependent upon the sale of your existing home, this contingency can provide valuable protection. However, it is worth noting that this contingency is not always as common and may discourage sellers from accepting your offer simply because they may not feel as confident about the sale going through.
Designing Your Real Estate Purchase Contract
These are examples of a few common types of contingencies, but there are several other ones that may be beneficial depending on your unique situation. When you are ready to submit an offer, your Lake of the Ozarks real estate agent will help you determine which contingencies to include and how to structure your purchase agreement so as to best protect your interests. Visit our website to learn more about our real estate resources for buyers.
The Property Shop at the Lake
2086 Horseshoe Bend Parkway
Lake Ozark, MO 65049