When it comes to buying a home, particularly if it is your
first, there will be many details you are unsure of. Dealing with all of the
unknowns can be difficult and stressful, and this is one of the main reasons
why contingencies are so important. Contingency clauses that are included in
the purchase of your new home make it much easier to navigate your way through
the confusing loopholes, and allow you to ensure that you understand exactly
what conditions must be met before the deal can be settled. To guarantee that
you are getting the best possible deal when it comes to the purchase of your
new home, here are some contingencies that should really be included in your
purchase.
Mortgage contingency
A mortgage
contingency is perhaps the most common contingency, and should definitely be
included in your arrangement with the seller. As a buyer, this contingency
provides you with added security during the purchasing process. The mortgage
contingency states that the buyer will attempt to obtain a specific type of
mortgage (whether it be Federal Housing Administration, Veterans Affairs or a
traditional mortgage) with a certain interest rate by a specific date before
closing. If you can’t secure a loan that follows these terms, you can back out
of the deal at no cost – the earnest money deposit and anything else that has
already been paid will be refunded. As securing a mortgage with favorable terms
can be the most difficult aspect of purchasing a new home, a mortgage
contingency can make life much easier for a buyer.
Appraisal contingency
Appraisal contingencies work in two different ways. The
first states that if a buyer is unable to find an appraisal that is at least as
high as the seller’s asking price, the buyer can back out of the deal at no
cost. The second way in which an appraisal contingency works is that, failing to
find an appropriate appraisal of the property, the buyer may negotiate a lower
purchase price with the seller. If the seller refuses, or a deal is unable to
be made, both the buyer and the seller are able to back out of the deal.
Inspection
contingency
While this is an important contingency in the purchase of
any home, it is particularly important if the property you are purchasing is
older or in any way run down. An inspection contingency means that the buyer
has a certain amount of time (generally between three days and two weeks) in
which they can perform numerous inspections on the home to ensure that
everything is in good working order. These inspections are particularly useful
for ensuring that the plumbing, foundations, septic system, electrics and anything
else you may be concerned about is in good working order. Should any inspection
result in a problem or something that you are concerned about, you can change
your mind about purchasing the property at no cost.
