Purchasing a home is one of the largest financial commitments you’ll ever make, and it’s understandable to want to protect your investment throughout the purchase process. When you’re ready to make an offer on a home, adding a contingency to your contract can give you time to assess the property and feel confident that it is a sound investment.
Here are five contingencies that can safeguard your investment:
1. A financing contingency ensures you’re not on the hook if something goes awry with your loan. If you’re unable to secure a mortgage or the terms and conditions change significantly during the contingency period, you can back out without any penalties.
2. An inspection contingency gives you a set time frame to have a professional home inspection done on the property. Should issues be found, you can negotiate with the seller to make repairs or adjust the sales price to account for the home’s condition.
3. An appraisal contingency protects you if an appraisal comes in below the sales price. When this happens, it’s up to you to make up the difference, either by securing additional financing, paying it out of pocket or renegotiating the deal. If none of these methods work, the contingency allows you to back out without losing your earnest money.
4. A well and septic contingency evaluates whether the well and septic are functioning. You can also have a test for bactieria performed on the well water. The inspector should locate and open the septic tank, and the distribution box and inspect the lines, locate and visually inspect the drainfield. and
5. A home sale contingency is crucial if you’re selling an existing home while buying a new one. Essentially, it says your purchase relies on your ability to sell your current home by a specific date. If you haven’t accepted an offer in that period, you can withdraw and get your earnest money back.
6. An occupancy contingency protects you should you need to move into your new home by a specific time. It gives you possession of the home on the date you specify.
7. A financing contingency is appropriate if you are getting a loan to pay for the property. This states that if your financing falls through, you are not required to buy the property.
There are other contingencies but these are the main ones to be aware of.
It’s no secret that today’s housing market is a competitive one, and bidding wars can be intimidating. Get in touch today to ensure that your bid stands out and your investment is protected.
Getting ready to buy a home? You may enjoy: