What Are Contingencies In a Real Estate Contract
How can contingencies protect you when buying a home? Well, that’s what we’re going to be talking about today and we’re gonna get started right now. Hey everyone, welcome back to my channel. I’m Ledeana Strand, with Homes by Strand and RE/MAX Town and Country in Port Orchard, Washington. If this is your first time here, consider subscribing by clicking on that little button down below and even hitting that little bell for notifications, ’cause I talk about a lot of really cool stuff related to the Port Orchard area, and you don’t wanna miss out. So, what are contingencies? That’s a good question. Purchasing a home is one of the largest financial commitments you’ll ever make, and it’s understandable to want to protect your investment throughout the home buying process. As a buyer, you’ll eventually reach a point where you have to make an offer on a house. The offer will be purpose presented in the form of a purchase and sale agreement, also known as a contract. This is one of the most important documents you’re gonna encounter throughout the home buying process. So, you definitely want to understand everything that goes into it and that includes contingencies. Here are some of the most common contingencies in a purchase and sale agreement. The first one is the financing contingency. Now this contingency insures that you’re not on the hook if something goes awry with the loan. If you’re unable to secure a mortgage, and the terms and conditions change significantly during the contingency period, you can back out without any penalties. The second contingency is the home inspection contingency. Now this contingency gives you a set time to have a home inspection done on the property. Should issues be found, there’s a few scenarios that could happen. One, you can request for repairs and have the seller fix the issues that you feel are important. Or two, the seller will say he or she will fix some of the items and not the others. Or they may say they do not agree to fix any of the requested repairs, and at that point, if you feel the agreement is not going to work for you and your needs, then you can back out of the contract at that point without getting penalized. Now the third contingency is the appraisal contingency. This contingency protects you if the home appraises below the sale’s price. When this happens, it’s up to you to make the difference either by securing additional financing or paying out of pocket. Or you can renegotiate the deal with the seller. If none of these methods work, then this contingency allows you to back out without losing your earnest money deposit. Number four is a home sale contingency. Now this contingency is crucial if your selling an existing home while buying a new one. Essentially, it says your purchase relies on the ability of you being able to sell your current home by a specific date. If you haven’t excepted an offer in that period, you can withdraw and still get your earnest money deposit back. Real estate contingencies are a double-edged sword for home buyers. They give you a legal way to back out of a transaction if some unforeseen event occurs, and that’s a good thing. But, this can make your offer less appealing to the seller, especially at a hot market when homes are getting multiple offers and that’s a downside. Market awareness, should be your guide. Bottom line is this, it is wise to use certain types of purchase agreement contingencies when buying a home. They prevent you from getting trapped into buying a home that you don’t want anymore or just simply can’t afford. But, at the same time, you have to exercise good judgment when including these contingencies in your purchase and sale agreement. One contingency to many, and the seller could reject your offer. If you liked this video, be sure to hit the thumbs up button, leave a comment down below, and share it with a friend and consider subscribing to my channel if you’re interested in learning all things related to the Kitsap County area and real estate. And remember, if you know of anyone who are thinking about buying or selling in the Kitsap County area, reach out to me anytime. I’m always here to help. Thank you for watching and I’ll see you on the next one. Have a great day.
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