All homes have their quirks and buyers shouldn't expect perfection as they view homes on the market. While minor imperfections should probably be overlooked, larger issues may need to be addressed. The way to deal with major repair problems is by using the contingency clause. In addition to items that need repairing, contingencies also serve a number of related needs. Read on to find out more about contingencies in your real estate contract.
Why Have Contingencies?
Some might wonder why not just disclose home issues upfront at the viewing and let the buyer beware. Home purchases involve huge sums of money and selling homes "as is" can be done but it is rare. Instead, there are a number of opportunities for buyers to know what they are buying. Once they've toured the home and done some research on schools and neighborhoods, they need professional help to find out more. Home inspections are almost always performed soon after a sales contract is signed. This in-depth scrutiny of the inner workings of the home can produce issues that even the seller may not have known about.
What Happens When Problems Are Found?
Depending on the level of seriousness, the sale might still go through if the buyer and seller can come to an agreement about how to handle the repair issues. If the buyer backs out due to a problem with the major systems of the home, they are eligible to get their earnest money funds refunded. If the seller agrees to take care of the problem, the buyer is responsible for ensuring that it is fixed before they attend the closing. Sellers often agree to lower the price or cover closing fees rather than have anything repaired. Contingencies can also apply to other things beside repair problems, however.
Other Common Real Estate Contingencies
A contract can also rely on a financing contingency. This contingency states that the contract will be void if the buyer fails to secure a mortgage. While most buyers have been through the approval process prior to searching for a home, the ability to be approved is never a guarantee.
Successful appraisals mean that the home appraises for (at least) the amount of the financing. If not, the appraisal contingency gives buyers a way out.
Speak to your real estate agent about how to use contingencies when shopping houses for sale. They can guide you so you get a home you love.