Negotiating a home-buying contract can be a complex process for many New York residents. There are various circumstances that might change a buyer’s willingness to complete the deal. In most cases, people make an offer to purchase a home without knowing everything that could be important for finalizing the real estate transaction. This is why home buyers often propose contingencies in a real estate contract to protect their interests.
Inspection contingencies provide protection
Perhaps the most common type of contingency in residential real estate transactions is an inspection clause. Home inspections provide a full evaluation of the home being purchased, including the state of the electrical system and the foundation as well as the potential for mold or termite damage. When the results of the inspections come in, this type of contingency gives buyers the option to negotiate price or remediation plans with the seller or even cancel the contract.
Contingencies for financing the purchase
Most people need a mortgage to purchase a home, and a financing contingency covers circumstances where the buyer is unable to receive financing. Even people with a mortgage pre-approval may run into problems during the underwriting process if, for example, the appraisal is deemed too high or a lender refuses to provide the total amount required. In many cases, an appraisal contingency comes alongside a financing contingency. This protects a buyer when the property is appraised below the sale price, hindering the ability to obtain financing.
There are several other popular options to include in a contract to purchase a home. A title contingency comes into play if a real estate attorney or title search company discovers issues prior to closing that could undermine the sale. A home sale contingency provides options with an escape route if they are unable to sell their current home before closing the deal.
Not all real estate transactions proceed smoothly from offer to closing. Including contingencies helps protect both parties if the deal falls through.