Many home buyers hesitate after deciding on a home because they worry about jumping into the decision, even though all signs point to “yes.” Buyers need have no fear as long as the offer has what are called “contingencies” attached. Contingencies give buyers an opportunity to back out of the deal or negotiate further if certain conditions are not met.
Here are some of the most common contingencies people use when making an offer on Red Deer real estate:
Possibly the number one contingency people place on home offers hinges on the outcome of a home inspection. The seller of the home must agree to let the buyer hire a professional building inspector to come in and assess the home’s condition. Home inspectors look out for small problems like a wobbly railing, but their main concerns lie in finding major problems like mold, termites or foundational issues.
Anything the inspector discovers must be addressed by the homeowner or compensated for in the form of a reduced closing price. If the buyer sees enough problems, they can also simply walk away from the transaction altogether.
Another important evaluation of the home comes in the form of an appraisal. When a buyer needs to pay for the home with a mortgage, the mortgage lender will send out an appraiser to make sure the home is worth close to the stated closing price.
On some occasions, the appraiser will reveal that the home is worth less than the closing price. Since the lender will only provide enough of a loan to cover the actual value of the house, a low appraisal can force buyers to pay out of pocket or renegotiate the closing price.
Mortgage or Insurance Availability
Buyers may place a contingency on their offer that lets them back out if they cannot find a mortgage lender or an insurance carrier for the property in question. Most buyers will not need to place these contingencies since they will be pre-approved or have had the home inspected to ensure that the homeowners insurance provider will not balk at covering the home. However, home sellers may see these contingencies from time to time.
Sale of the Old Home
Home buyers who are transitioning from one home to another may be trying to juggle being a buyer and a seller at the same time. To help them get their finances in order, they may request a time allowance for their own home to sell before they provide a down payment and a mortgage to cover their new home purchase. In a competitive market, homeowners may overlook these types of contingency offers in favor of more flexible buyers.
These are just some of the methods home buyers use to make offers that will not come back to haunt them later. For more help on navigating the home buying process, you can visit our buying page.