Contingencies for Home Buyers

What Is A Contingency Offer And How Does It Usually Look Like?

A contingent offer contract means that you as a homebuyer are willing to buy a home or finalize a real estate transaction when the seller meets the requirements you listed as a contingency and they accepted the offer. It is a mutual agreement that requires both parties to agree on the contingencies. Homebuyers can list a number of contingencies, and the seller has the right to accept or reject them, as well as to renegotiate. Contingent offers can be suitable for the buyer because it guarantees them that they will get their deposit back if the seller does not meet all the requirements agreed on. While different things can be put down as contingencies, a few stand out as the most common ones. It is best to talk about options with your real estate agent, given that they know when and what kind of contingencies would be reasonable based on your situation and the home you pick. Here are a few examples:

Home inspection contingency

A home inspection contingency means adding a clause that states you will buy the home if the home inspection results turn out as expected (i.e., that everything is okay with the home and in line with what the seller told you about the home). However, if an unexpected issue arises, like termites or roof damage, you can walk away from the purchase or renegotiate the price or demand repairs to be done by the seller.  

Contingency on repairs

One of the most common contingencies listed is smaller or bigger repairs the seller needs to do for the buyer to buy the home. If the home you want to buy seems to require certain repairs to match the asking price, you may want to put that down in your offer. Discuss it with your real estate agent, who can give you advice on which repairs seem feasible and fair and which don't.

Mortgage approval contingency

Many home buyers have a mortgage preapproval when deciding to buy a home, but they cannot get the actual mortgage approval prior to the home purchase. To make sure your mortgage amount will match the amount you were pre-approved for, go with a contingency that states you will buy the home if you get the funds from the lender. This is a pretty reasonable contingency, and many sellers are on board with it since it mostly works out just fine.

Appraisal

One of the things you can do is make your offer contingent on the appraisal results to see if the price of the home matches the appraiser's price. It is similar to the mortgage approval contingency, given that the lender will only let you borrow the amount that the appraiser lists and not the price you agreed with the seller. If the appraisal states that the home's value is lower, you can walk away from the transaction and keep looking for a new home or renegotiate the price with the seller.

Contingency on selling your current home first

Many home buyers who are moving up or downsizing first look at the homes on the market before selling their old or current home. Once they find what they are looking for, they may ask the sellers to give them some time to sell their old home before they fully commit to closing the deal, and they can make their offer contingent on that. The seller can cancel the contract if the homebuyer does not sell within the period that was agreed in the contingency offer.

Buying a home is a big decision, so every homebuyer should make sure they are absolutely comfortable with their final decision and contingency offers can add an extra layer of security. For more information on buying a home in Vaughan, Mississauga and other GTA areas, make sure to contact Manoj Kukreja.