The home buying process is both exciting and also a little nerve-wracking. After all, for many a home is the single biggest purchase of their lifetime. Looking for ways to better protect yourself through the transaction? This is where home buying contingencies come in. These allow you to back out of a purchase if something isn’t quite right.
Though you can technically have a contingency on anything, there are five common home buying contingencies that I often see when assisting buyers. Keep in mind that not all of them will be necessary for your situation and that an experienced realtor can help you to decide what’s best for your situation – particularly in a competitive buying market.
Keep reading to learn 5 common contingencies all home buyers need to know.
Appraisal Contingency
This type of contingency is sometimes required by your lender. It confirms that the home is worth the value of the loan so that in the case of default, they can recoup their costs. What happens if the home appraises for less than the purchase price in the contract? This can give you the opportunity to back out of your purchase – or potentially negotiate a lower purchase price.
To learn more about the ins and outs of appraisal contingencies, check out this article from Forbes.
Financing Contingency
Let me preface this by saying that I firmly believe that every buyer should be pre-qualified before they start home shopping. Not only does this eliminate the need for a financing contingency, it also makes you more competitive in the eyes of the seller.
However, in some markets and some scenarios, you may find yourself in a position where you’re only pre-approved when you find your dream home. Doing so means that you still need to finalize your financing to purchase and this contingency becomes necessary.
But to be clear, make sure you get that pre-qualification first! 😉
Home Inspection Contingency
As the name suggests, this contingency hinges on the inspection of a potential home. While a home can’t ‘pass’ inspection per se, doing one can uncover any hidden defects that may not be visible to the untrained eye. This includes problems with HVAC, the roof, windows, and other major systems of the home. Doing an inspection can ultimately save you thousands if a major problem is uncovered.
Want to know more about home inspections? Check out my top four tips for home buyers.
Home Sale Contingency
If you need to successfully sell your current home before buying your new one, this is the contingency you will need. In the case that you’ve got enough cash for a down payment, but you may not have enough to cover the mortgage for two homes, this contingency can help you to get out of your contract.
In a market like we have today, this is a gamble. On the one hand, if you’ve got a solid home to sell, you may be able to make it happen. On the other hand, there are likely other buyers that don’t have this contingency, making their offer that much stronger.
Unsure of how to proceed if you’ve got a mortgage that you need to be rid of first? Talk to your realtor – they may have ideas about how to make it all work out in your favor.
Homeowners Association (HOA) Contingency
Buying a home with an HOA has benefits and drawbacks. On the one hand, it can simplify some of your maintenance and expenses into a single fee. On the other hand, it can sometimes be a pricey way to do so. When you’re considering a home with an HOA, it’s essential that you get to review any agreements or documentation related to it before purchase. This contingency means that if you don’t like the terms presented, you can back out of the sale.
When you’re looking at homes….
The Northern Virginia region housing market is moving fast – particularly in Loudoun County. This means it can be tempting to go in without any contingencies. While this can sometimes be necessary, it’s not without its own risks.
Wondering what the best way to proceed for your situation is? With an experienced real estate agent by your side, you can be confident you’re making the right choices. And it can mean the difference between missing out on a home you love and negotiating your way to a contract that also works for you.
Ready to find your dream home in DC, MD, VA, or WV? I’m licensed in all areas and would love to help you find your perfect property. Contact me at sian@sianpugh.com for a complimentary list of homes that fit your criteria.
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