Many prospective buyers make purchase offers on a home even though they know little about the property. The knowledge they do have is likely to have come from spending a few minutes viewing the property along with the information from the multiple listing service (MLS) provided by the listing agent and the seller's disclosure documents.
Fortunately, prospective buyers can choose to include one or more contingencies when making their offer to help protect their interests. If you are currently looking at homes for sale, the following information can help you better understand how contingencies work and why it is important to use them.
Basic information about popular buyer contingencies
Contingencies can be used by either party, but they are particularly useful for buyers. The most commonly used contingencies in real estate include:
- Financial ones (such as contingencies on loan approval, type of loan, and appraisal)
- Inspections (usually used for basic home inspections but can also be used for other types of inspections such as structural, electrical, roof, etc.)
- Sale of another home (allows a buyer to purchase one home based on the successful sale of another)
The current, highly competitive seller's market has also caused more frequent usage of the sight-unseen contingency that can be used in situations where buyers want to submit their offer before viewing the home.
Using one or more contingency clauses allows buyers to have something of an emergency exit from the purchase contract, should a problem arise that would cause them to change their minds about purchasing the property. Contingencies can also be used as a tool to reopen negotiations, should a covered problem arise during the transaction process.
Buyers cannot force sellers to agree
When deciding which contingencies will be needed, buyers should remember that submitting an offer with contingencies does not mean that sellers will accept it as written. As with any purchase offer term, sellers can choose to ignore the offer, formally refuse it, or counter back with terms of their own.
Be wise about lifting contingencies
Sellers who have accepted one or more buyer contingencies are sure to want them lifted as quickly as possible. Since contingencies placed by the buyer act to protect their interests, it is important to keep them in place until the specified contingency has been successfully addressed.
Buyers can utilize contingencies more effectively when working closely with an experienced real estate professional who can assist them with all aspects of the purchase. Contact a real estate agency like BHHS Towne Realty to learn more.