For new homes buyers and sellers, one important item to think about is contingencies. Contingencies are requests made by the buyer in order to finalize the sale. The following are some things you should know about contingencies before purchasing or selling a house:
A contingency is the aspect of a home sale contract that protects buyers and sellers of home from different issues that could cause a contract to fail. They can often provide the buyer or seller a way to exit the contract if specific conditions are not met by a certain deadline.
Different Types of Contingencies
There are a variety of contingencies that can be added to a home sale contract. The following are among the most commonly seen in many home purchases:
Finance Contingency- This contingency says that the purchaser of the house will have a guaranteed way to finance the sale. A finance contingency is a crucial aspect to a sales contract. If the purchaser does not have a solidified method of paying for the house, many man-hours will be wasted on the sale. Not only will a pre-approval be necessary, but proof of an approved loan may also be required before the sale can move ahead. Additional financial contingencies can be added, such as a cash offer, down payment contingencies, and any other method that can provide proof that the buyer can pay for the house.
Insurance Contingency- This is not always a requirement but they are becoming increasingly popular. For homes that can be hard to insure, this can make the buying of the home more difficult. A homebuyer can create a contract that is contingent on the ability to properly insure the house. Homes that have endured major issues, such as flooding or mold infestation can be hard to insure unless specific and expansive repairs are made and can be proven.
Escrow Contingency- Escrow is the amount of time between the start of the sale and the end. This type of contingency will be necessary if the seller of the house needs a set amount of time to leave the property.
If you are going to be dealing in a home sales transaction, be sure to get all of your contingencies in writing. This can be a problem for those who are buying and selling from friends and relatives. While you want to have faith that the acquaintance will make good on their word regarding contingencies, it can leave you with a halted sale if someone tries to take advantage of you. Work carefully with your realtor and attorney to ensure that nothing will bar the sales process.