You want to feel confident when you negotiate with a seller to buy a house. If you are buying your first home, you might feel apprehensive about entering into any kind of a deal. In the event you discover a problem with the property, you may want to back out. This is why many real estate contracts come with contingencies.
Not all real estate agreements have contingencies built into them, so it is important to know contingencies exist. Before you begin your real estate transaction, you can ask a seller to include contingencies that you may want. Forbes explains what contingencies are and how they benefit home buyers.
Defining a real estate contingency
In a real estate contract, a contingency is a condition that is part of an Agreement of Sale. The property should meet this condition if the purchase is to move forward. A contingency protects you in the event circumstances change and you no longer want to buy the property. So before you start your purchase, you can ask the seller to include contingencies that you want in the contract.
Explaining different contingencies
A contingency covers a particular eventuality. Inspection contingencies allow you to wait for the results of an inspection report before committing to buy a home. If the inspection reveals problems, you may negotiate with the seller over repairs to the home or refuse to buy the home if talks do not work out. With a title contingency, you can back out of a real estate deal if a background check finds liens on the home or other unresolved ownership issues.
Some contingencies deal with finance issues. With a financing contingency, you have time to secure a mortgage or other financing before committing to a sale. If you cannot attain funding to buy the home, you can back out. Similarly, with an appraisal contingency, you can depart a sale if you cannot receive a full loan for a home because the appraisal on the property is too low.