Buying a home, especially your first home, can generate alternating emotional currents of excitement and fear. Proper contingency agreements are a way for home buyers to insulate themselves against fear and protect themselves against unpleasant shocks when investing in a new home.
Contingencies are pre-defined conditions that must be met in order for a home sale to be completed. If the buyer’s (or seller’s) contingencies are not satisfied prior to closing, the sale could be cancelled and earnest money, funds deposited in good faith and held in a separate escrow account, will be returned to the buyer.
Common residential real estate contingency clauses for home buyers include:
- A “clear title” contingency to insure against problems that may arise regarding the seller’s legal ownership of (and therefore right to sell) the property. Sellers generally will have 30 days to clear any title issues
- An appraisal contingency that gives the buyer the option to withdraw an offer if the property appraises for less than the agreed-upon purchase price.
- A financing contingency, to insure that the buyer is qualified and able to obtain sufficient funds to purchase the home.
- A home inspection contingency to protect against major problems with regards to things including the home’s structure, heating and cooling (if applicable) systems and roof. It may be negotiated for the seller to assume responsibility for the cost of repairs noted by the home inspector, up to a pre-defined amount
Other contingencies may cover the availability of property, casualty insurance and flood insurance. If purchasing a home that is not connected to a public water or sewer source, buyers may include contingencies for water quality testing and a septic inspection.
Finally, buyers may also insert a “home sale contingency” that empowers them to sell their current property in order to qualify for financing of the new home. Sellers may accept such a contingency, but they will generally require a “kick-out clause” that allows them to keep the house on the market. In the event that they receive another offer that does not have a home-sale contingency, you would have a set amount of time, for example three days, to remove the home sale contingency and complete the sale. If you do not, the home could be sold to another buyer.
Buyers can and should use proper contingencies to protect themselves, but it is also important to not insist on too many contingencies when submitting an offer, as this can generate fear in the seller that they are wasting time on an offer that will never close, and possibly missing out on other opportunities as a result.
Feel free to contact me with any questions about contingencies or other residential real estate topics… I’m happy to help and may address them in an upcoming article.
Brent Metzger is a sales associate at Roche Realty Group in Meredith, NH.
Brent can be reached on his cell phone at (603) 229-8322, at the office at (603) 279-7046, or by e-mail: firstname.lastname@example.org
Please feel free to visit www.rocherealty.com to learn more about the Lakes Region and its real estate market.