Common Contingencies Home Buyers Ask For

I previously talked about what to negotiate when buying a home. These included things like furniture, a home warranty, repairs, and timing. It is not unheard of for buyers to make requests for certain circumstances to be met in order to complete a sale. These are called “contingencies”. Here are a few common contingencies that home buyers ask for as part of the sale.

Common Contingencies Home Buyers Ask For

What is a Contingency

First, it may be helpful to explain what a contingency actually is. In a real estate transaction, a contingency is a clause put into a sales agreement that requires a specific action. If these conditions are not met, the sale may fall through. For the buyer, this may also mean receiving their earnest money back. But only if the specific contingency is actually listed in the agreement and okayed by both parties.

Home Sale Contingency

First up? The home sale contingency. For many buyers to qualify for a mortgage on a new Inland Empire home, they must first sell their current home. Otherwise, they may end up dealing with two mortgages…at least for a bit. But in order to do that, they must qualify for two mortgages. A home sale contingency states that the buyer has a certain amount of time to sell their current home. If they don’t, then the seller puts the property back on the market.

Appraisal Contingency

An appraisal contingency provides a safeguard for the buyer in case the appraisal comes in below the agreed sale price. Why is this important? Because lenders will not approve a mortgage loan for more than the home’s appraised value. If that happens, the buyer has three options: come up with more money down, try to negotiate a lower sale price, or walk away.

Home Inspection Contingency

Next…the home inspection contingency. First, California buyers are not required by law to conduct an official inspection of the property before purchasing a property. However, it makes good sense to do so. The home inspection contingency allows a buyer to back out of a sale if it shows any major issues. But keep in mind that minor issues may show up even on newly constructed homes. And instead of walking away, you might want to negotiate either the completion of repairs or reducing the price of the property to compensate for the cost of repairs/replacement instead.

Financing Contingency

Finally, the financing contingency. This states a specific time period that the buyer must obtain financing for the home’s purchase. In today’s market, many sellers won’t even entertain an offer without a pre-approval letter from a reputable lender. So make sure you get your ducks in a row financially speaking before you start looking at homes.

All of these common contingencies help a buyer keep their earnest money deposit in case a sale falls through. Talk to your Southern California REALTOR® about which (if any) of these contingencies you need to put in place when buying a home. It’s always better to be safe than sorry.

Muna Dionne, your Inland Empire specialist with Coldwell Banker Realty