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Understanding Contingencies

Buying a house can be exciting, but it's also a big investment. To protect yourself, you can include contingencies in your offer. These are conditions that must be met for the sale to proceed. Here are three common contingencies to consider:

1. Home Inspection Contingency:

Imagine you find your dream home, put in an offer, and it gets accepted. But what if, after closer inspection, you discover major issues like a leaky roof or faulty foundation? This is where a home inspection contingency comes in. It allows you to hire a qualified inspector to check the property thoroughly after your offer is accepted. If they find significant problems, you have three options:

  • Renegotiate the price: You can work with the seller to lower the price based on the cost of repairs.

  • Request repairs: You can ask the seller to fix the problems before you finalize the purchase.

  • Walk away from the deal: If the issues are too serious or the seller doesn't agree to your terms, you can back out without losing your earnest money deposit.

2. Appraisal Contingency:

Securing a loan often requires an appraisal, which estimates the property's market value. This contingency protects you if the appraisal comes in lower than the agreed-upon purchase price. In this case, you can:

  • Renegotiate the price: You can work with the seller to match the appraised value.

  • Seek additional funds: If you're still interested in the property but need more money to cover the gap, you can explore other financing options.

  • Walk away from the deal: You can choose to back out without penalty if the appraisal falls short of your expectations.

3. Loan Approval Contingency:

Obtaining a mortgage can take time. This contingency gives you a specific timeframe to secure financing for the purchase. If you're unable to obtain a loan within the deadline, you can typically cancel the contract and get your earnest money back.

Remember: While contingencies offer protection, they can also make your offer less attractive to sellers compared to those without them. Weigh the pros and cons carefully to decide what's best for you. Consulting a trusted and professional real estate professional can help you understand contingencies and their implications in your specific situation.

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