When you are buying a house, there are many things to consider and in many cases you will want certain things to happen before you decide to move forward with buying a house. Situations like these are the benefits of a contingency. A contingency allows you to delay an action until something else happens. With home buying, there are many cases where this might be a helpful. Here are a few ways you could benefit from a contingency when you are buying a home.
If you are planning to buy a new home but you have a home to sell, a contingency can be extremely beneficial. You may make an offer on a new home that is contingent upon your current home selling. In this case, the contract would allow you a certain amount of time for your home to sell so you can move forward with buying the new home. If your home doesn’t sell in that time frame, the home would go back on the market or you could choose to buy it without selling your current home if you have the financial resources to do so. This can be beneficial if there is a home you really like that you don’t want to get away from you while your home is for sale. In a seller’s market, sellers may be less likely to accept this option but it never hurts to ask.
Another contingency that might come up in your home purchase is a financing contingency. This allows you to say the home you are buying must appraise for a certain amount or that you must be able to get a loan for the property or you won’t buy it. These contingencies are great ways to protect yourself from being forced to purchase a home that is worth less than you expected or that the lender doesn’t agree to make a loan on. While you can’t technically be forced to purchase a home if you change your mind, there may be penalties for not moving forward with the purchase of the home you have a contract on. These contingencies will protect you from that.
Inspection contingencies are another type of contingency in a sales contract. This allows you time to investigate the condition of the property to make sure it meets your expectations. If a home doesn’t meet your expectations or has major flaws, you will be allowed a certain amount of time to change your mind about purchasing it. In some cases, you may find something wrong with the house and the seller agrees to repair it so you will move forward and that is ok too but this contingency will protect you so you aren’t penalized if you and the seller don’t agree on repairs.
In the end, contingencies are designed to provide you with protection in the event you choose not to complete a purchase or you are not able to do so. Without such contingencies built into the sales contract, you could lose your earnest money deposit or even be sued for nonperformance in some cases. If you have questions about how a contingency might be beneficial to you when buying a home, give us a call and let’s talk about your situation.
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