By admin1
What other contingencies might come up when buying a home?
Besides the more common inspection and financing contingencies, there are other clauses you might encounter in a home purchase contract. These include the home sale and appraisal contingencies. Each of these contingencies can provide specific protections for you in the homebuying process, but they can also come with challenges.
Home sale contingency
This contingency links the purchase of the new home to the successful sale of your current home. It’s particularly relevant if you’re relying on the sale proceeds as a significant part of your new home’s down payment.
What does this mean to a buyer?
For you as a buyer, a home sale contingency offers financial protection. It ensures you’re not legally bound to buy a new home before selling your current one, safeguarding you from owning two properties at once or facing financial strain for two mortgage payments. It’s a strategic move if you need the funds from your current home to finance the new one.
What does this mean to a seller?
For sellers, the home sale contingency can be risky. It introduces uncertainty, as the sale depends on another transaction outside their control. If the buyer’s current home doesn’t sell within the agreed period, the deal could fall through, leaving the seller to restart the selling process.
Appraisal contingency
An appraisal contingency ensures that the home’s value, as determined by a professional appraiser, meets or exceeds the agreed-upon sale price.
What does this mean to a buyer?
For the buyer, this contingency is a safeguard against overpaying. If the appraisal comes in lower than the sale price, you have the option to renegotiate the price, make up the difference, or walk away from the deal with your deposit. You will, however, still need to pay the cost of the appraisal. This clause can play a vital role in ensuring that your investment aligns with the home’s true market value.
What does this mean to a seller?
For the seller, an appraisal contingency adds another layer of uncertainty. A low appraisal can lead to renegotiations or even the collapse of the sale. It can be a nerve-wracking part of the process as they await confirmation that their home’s appraised value aligns with the agreed sale price.
