How to Make a Contingent Offer on a Home
Accepting an offer and signing the contract are major steps when purchasing your real estate property. The money you have to invest is significant, and it’s normal to question the unknown, such as the real condition of the property, its equivalent fair market value, and its affordability. To protect your rights as a buyer against these possible uncertainties, you can make a contingent offer on a home. You can include this on the sale contract before you sign. And, if you are wondering how a contingency offer is made, here’s your guide.
What is a Contingency Offer?
A contingency offer is a clause on the sale contract that protects the buyer against uncertainties. It also allows withdrawal from the sale without financial penalties. The rights and privileges you will have as a buyer will depend on the type of contingency offer you will make on a home. You can also use the offer to renegotiate the price if backing out is not an option.
How to Make a Contingency Offer
Making a contingency offer is based on the type of privilege you prefer before moving the sale forward. There are three common types of contingency that you can choose from: home inspection contingency, appraisal contingency, and mortgage contingency.
Home Inspection Contingency
A usual contingency offer is based on home inspection results. Some lenders require this process, and most real estate buyers want them to uncover any major problems in the structure of the house that can’t be seen with the naked eye.
To make this type of offer, communicate with the seller. Tell him or her the conditions you want to include in the clause, such as the opportunity to renegotiate the contract price in case of major issues.
Another common offer is the appraisal contingency. The appraisal is often a required process in a home sale. A bank or lender asks for the appraisal first, before it releases the amount of funding the buyer can borrow. No lender would be willing to pay for more than what the home is worth.
Communication with the seller is necessary under this contingency offer, because it allows you to renegotiate the total price of the home as well. If the appraisal is lower than the offer, there is room for negotiation. And in case the lender doesn’t want to fund the house based on the appraisal, you are free to walk away from the deal.
Last, but not least, is mortgage contingency. We all know that the major percentage of home buyers rely on financing to buy their properties. This is for buyers who have doubts about their ability to get mortgage approvals. Under this clause, the buyer is free to withdraw from the sale contract if no bank or lender approves his application for a mortgage. Having someone to assist you with your contingency offer will help you have a more successful real estate transaction. If you are currently looking to buy or sell a home, you can call JAM Properties, LLC for personalized real estate solutions!