Excitement and enthusiasm often rule the home buying process. Once you find that perfect property, you want to make an offer, close as quickly as possible and start moving in to your new home.
Your joy at finding a home in the right school district or with all the right amenities may overshadow your rational thought processes. Before you jump at the opportunity to buy, you want to make sure that you protect yourself and your investment.
Including contingencies in your purchase offer will protect you if you have to back out of the transaction. Otherwise, if the sale falls through after the seller accepts your offer, you will likely lose your earnest money.
What are common contingencies, and why do people use them?
Contingencies are clauses in your purchase offer that allow you to nullify the offer or renegotiate the terms in specific circumstances.
A common one is a home sale contingency. If you need to sell your house and can’t afford to mortgages for more than a month or two, including a contingency that the sale will only proceed once you have an offer on your home can protect you from overextending yourself.
Buyers also often include contingencies that protect them if the property value comes in under the offer amount or if an inspection turns up significant defects. These issues can affect financing or the amount that a buyer would have to invest in the property to live there.
Although contingencies can reduce the likelihood of a seller selecting your offer, they do provide you with crucial protections that you likely don’t want to forgo when completing one of the biggest purchases of your life.