Home Buying Advice - Contingencies
When you write an offer your Realtor should include some contingencies that are designed to protect you if for some reason you have to cancel the contract.
Home Purchase Offer Contingencies
When a buyer writes an offer to purchase a home, the Realtor should include some contingencies that are designed to protect the buyer if for some reason they have to cancel the contract. Most contingencies are associated with a date, after which the contingency condition is deemed removed from the contract. Some of the more common contingencies are:
- Dependent on the sale of your current home. Although in most cases a buyers sells their property before buying another property, the timing and financing don’t always work out that way. This contingency protects the buyer if the sale of their current home falls through, or if they don't manage to sell their home. Usually with this type of the contingency the sellers home remains on the market, and if they receive another offer the buyer must either remove the contingency and proceed to close or withdraw their offer.
- Based on obtaining a mortgage. If for some reason you cannot obtain a mortgage then you can cancel the purchase contract without penalty.
- Based on the results of a home inspection. If the home inspection uncovers something you do not like and you cannot come to some agreement with the seller then you can cancel.
- The home appraises for the loan amount. Sometimes the home appraiser provides a valuation of the property that is less than the purchase price listed in the contract. In this case the lender does not think that the home is worth what you are offering and so the buyer cannot obtain a mortgage for the full purchase amount. If this happens the buyer and seller may renegotiate the purchase price based on the appraised value or the buyer can cancel the contract without penalty.
If it looks like a contingency date is going to expire too soon, then the buyers Realtor may write up an addendum offer and ask for an extension to the deadline date. For example, the loan process may be delayed and so the buyers Realtors needs to ask for more time so that the loan process can be completed. The seller does not have to accept this, but if they don't the buyer can withdraw from the contract (assuming the original contingency date has not passed).
Note if all the buyers contingency deadlines expire and the buyer wants to pull out, they may have to hand over their earnest money or even face a lawsuit.Return to Home Buying Advice