Contingencies in real estate are one of the main ways buyers protect their interests while buying a home. The word contingency means that a deal depends on particular terms being met. This can mean a buyer agrees to a real estate contract under conditions, like a home inspection meeting their expectations. However, not every homebuyer in Virginia uses contingencies.
Contingencies come with risk
In a hot real estate market, sellers get multiple offers. If they get an offer without contingencies, then they know that the sale will go through no matter what. For the seller, this means less risk of a deal falling through, and they are more likely to take that offer. For a buyer, adding contingencies protects their investment in the earnest money they put down as part of the process.
Protection for homebuyers
Examples of real estate contingencies:
- Home Inspection
- Securing a mortgage
- Home sale for the buyer
The above list covers some of the most common examples of real estate contingencies. However, buyers can stipulate any of their needs as a contingency. The more unusual the contingency, the more it may frustrate a seller, so it’s important to consider what is most important to you.
While some buyers may feel comfortable without adding a home inspection contingency, many will require this. They want to know that they have an easy way out of their contract if the home inspection reveals unexpected and expensive problems that they would have to fix on a home. Sometimes, a mortgage lender may require a contingency, like that of an appraisal.
There are many reasons a buyer may add contingencies, and they won’t scare off every seller. For most people, it will be important to evaluate their own needs as they move forward while being aware of the risks involved on both sides of a real estate contract.