Contingencies protect both buyers and sellers from getting locked into a purchase agreement when certain issues arise. Now you may be asking, why would any reasonable homebuyer consider waiving contingencies?
For one, a red hot seller’s market may convince some buyers that giving up some contingencies can make their offer more attractive. This is especially the case when demand is sky high and there are not enough houses to go around.
However, there are certainly some contingencies that you should seriously consider holding on to — even when the market begs to differ.
The home inspection contingency
There may be a lot of potential repairs — or headaches — that await you if you choose to let go of the home inspection contingency. A leaky roof, damaged foundation, or problematic pipes… the list goes on.
Even though a visual inspection doesn’t detect any problems, you may soon discover after moving in that a number of fixes need to be done to make the home livable. Having the option to back out of a purchase contract if a seller doesn’t make the necessary repairs is an advantage that you shouldn’t give up.
There are also additional contingencies pertaining to specific inspections that you should always keep:
- Water and septic system inspection: This ensures that the water source in your future home is safe and won’t cause any nasty health problems. When it comes to the water that you’ll be bathing in or drinking, it’s essential to make sure it’s clean.
- Mold inspection and remediation: Molds are sneaky because they are not immediately obvious when you view a home the first or even the second time around. Over time, extensive molding in a home can cause lung and skin problems to inhabitants.
The financing contingency
If you’re planning to take out a mortgage, you should think twice about waiving the financing contingency. It’s the linchpin to the whole strategy of using a loan to finance a home purchase.
That said, this is far from being a hard and fast rule. In certain situations, it may be okay to part with this contingency. For example, if this isn’t your first home and you’re working with a long-time lender, then waiving may not be a problem at all.
Additionally, if you’re paying with cash, then this contingency doesn’t really serve a solid purpose.
However, if you’re concerned with the financing amount you need to muster or you feel that your credit score may not be high enough, then it’s most likely best to hold on to this contingency.
The title contingency
Waiving the title contingency lets you walk away from a deal if you discover claims against the home and other issues. For instance, what if you find that the seller doesn’t actually own the home they’re selling?
There are some states where you’re not allowed to give up the title contingency. But if you do find yourself in a state where it’s permitted to waive, the best option is to err on the side of caution. In other words, stick with the contingency.
Title problems frequently arise in the industry and there’s too much risk involved if the title isn’t as air-tight as you might expect. It’s another layer of complexity that makes the homebuying journey needlessly difficult.
Are there any contingencies you can do away with?
The home sale contingency allows existing homeowners to safely get out of a deal if a particular property doesn’t sell on a specific date. While essential to a homeowner who is transferring from an old home to a new one, it can be safely waived by investors who have multiple properties.
The homeowners association (HOA) contingency is another one that won’t inflict any serious harm. Its only purpose is to let you walk away from a home purchase if you discover that certain HOA rules aren’t to your liking (e.g., a ban on particular paint colors, restrictions on the dogs you’re allowed to have). These are matters that you should already know before you even express your interest in making an offer.
Seek expert advice on buyer contingencies and other real estate matters
Our team from Coldwell Banker Traditions will provide you with tried and tested advice on contingencies and homebuying in general. Allow us to help you inch closer to that dream home in Williamsburg, VA and the Hampton Roads area. Get in touch with us at 757.229.9595 or email us at info(at)cbtraditions(dotted)com to book a real estate consultation.