Think of a contingency clause as an insurance policy. Once you find a home and make an offer, you hope everything will go smoothly; but just in case it doesn’t, you have a contingency clause in place that allows you to back out of the contract without losing money.
Most purchase agreements already have a few key contingency clauses in place to protect against the bigger things—such as a lower-than-anticipated home appraisal—but there are contingencies that go beyond the norm. If you’re about to make an offer on a home, consider all of your options.
Some contingency clauses are commonly used when making an offer. Here are some examples:
Home inspection: Gives the buyer the right to order a professional home inspection and back out of the sale if major unreported damage is found.
Appraisal: The buyer won’t be obligated to buy the home if the appraised value of the home is lower than the asking price. Mortgage availability: This gives the buyer time to find a mortgage for the home. If the buyer can’t find financing, either party can cancel the deal.
You don’t have to stick with just the standard contingency clauses. Depending on your situation, it may make sense to add additional clauses to the purchase agreement agreement. Here are some examples:
HOA rules: If you’re considering buying in an area with a homeowners association, it may be prudent to require a copy of the HOA guidelines. HOA fees vary and if the dues are high, your annual homeownership costs could go up considerably. Many HOAs also have rules on parking, landscaping, paint colors, and even holiday decorations. If you aren’t happy with the HOA restrictions, you’ll want the option to back out of the deal.
Selling your current home: If you’re trying to sell your existing home before you buy, you may want to put a selling contingency in place. If you’re unable to sell your current home within a certain time frame, this contingency allows you to cancel your offer.
Moving furniture early: With this contingency, you and the seller agree to allow you to move personal property in (or move in entirely) earlier than the closing date. You may have to agree to pay the seller rent if you move in before closing, but it will spare you from
putting your belongings in storage and finding temporary lodging.
Adding contingency clauses
A basic offer may not contain any contingency clauses. While many Realtors include some standard clauses in every offer, you should consult with your agent to make sure you’re including contingencies for everything you can anticipate before you submit your offer.
Once you’ve submitted your offer, keep in mind that the seller may submit a counteroffer with his or her own contingency clauses as well.
If you are in the market for a new house and would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Lang Premier Properties. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.