If you are a first-time home buyer, you might be anxious to get in on a good deal for a Wilmington or Newark home. Prices are reasonable, mortgage rates are low, and the homes you see on the market today could be sold tomorrow. Naturally, there is some sense of urgency. You have competition from investors and other home buyers. You might find yourself tempted to limit, or even omit, contingencies from your purchase offer, in the hopes of getting it accepted by the seller.
The danger in this notion is the fact that a purchase offer is a legal contract. Your contingencies allow you to cancel the offer if certain stipulations are not met. Without contingencies, you have no legal escape from the deal. You could end up on the hook for failing to go through with the purchase, even if the circumstances were beyond your control. It pays to understand contingencies!
Here are the most common home buyer contingencies included in a purchase offer:
1. Financing contingencies. This states that your purchase is conditional upon obtaining a mortgage at suitable terms. You can be specific and identify the mortgage terms that you need. Even if you are pre-approved for your mortgage, it's wise to have a financing contingency, in case something falls through for an unforseen reason prior to closing.
2. Appraisal contingencies. Your mortgage lender will require that the home has sufficient collateral value to cover the mortgage in case of default. If the appraisal falls short of the sale price, your contingency allows you to exit the deal. Otherwise, you could be expected to cover the difference, in cash, between what the bank is willing to lend you, and the sale price of the home.
3. Home inspection contingencies. This allows you to have a third party inspect the home and check for any signs of obvious defects. While sellers are expected to disclose any known issues with the home, there are things that may escape their notice, or their memory. If any significant, undisclosed issues are found by the inspection, the contingency allows you to cancel the deal, or at least negotiate the needed repairs with the seller.
These are very basic examples, and there are a host of contingencies you may wish to use depending on the situation. You may have a contingency that says the deal is subject to the approval of your financial planner, or your attorney. You could have a contingency that is subject to the homeowner association allowing you to have an above-ground pool. Or a contingency subject to the town allowing you to operate a business out of the home. You don't want to go bananas with contingecies, but any key points affecting your ability and desire to purchase the home should be covered.
As your Wilmington and Newark real estate expert, I will guide you through using contingencies and help you write an offer that protects your interests!
There is a lot to know when it comes to home buying! Fortunately, good information is available, and it's free! Attend a free home-buying seminar and learn about home buying in a pressure-free environment. The next one is in Newark on May 11! See the Registration Page for a list of upcoming dates and locations.
Contact me for friendly, knowledgeable help with your home buying questions!