Should You Ever Waive Contingencies When You Buy a Home?
Many sellers want buyers to waive contingencies in their purchase contracts. But is that ever a good idea? This guide explains.
Should You Ever Waive Contingencies When You Buy a Home?
Contingencies are typically built into real estate purchase contracts to protect the people signing them. Before you can decide whether you should ever waive contingencies to buy a home, you need to understand what a contingency is and why it works.
What Are Contingencies?
Contingencies are conditions that must be met in order for a deal to go through. Your real estate agent will build contingencies into your contract to protect you throughout the transaction. If you or the seller doesn’t live up to your end of the bargain, you can walk away from the deal – often with your earnest money deposit in your pocket.
The Most Common Contingencies
Check out the most common contingencies that real estate agents used to protect their clients:
- Financing
- Inspection
- Appraisal
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Financing Contingencies
A financing contingency says that if you can’t secure the funds to purchase the home, you’re off the hook. You do have to make a good faith effort to get the money, but if it just isn’t in the cards for you, you can walk away from the transaction.
Inspection Contingencies
An inspection contingency says that you have the right to hire a home inspector, and that if the home inspector uncovers any deal-breaking issues with the home, you can walk away from the deal without losing your earnest money deposit.
Appraisal Contingencies
And appraisal contingency says that if your lender determines the property isn’t worth what the seller wants you to pay for it, you don’t have to go through with the purchase. Most lenders won’t allow you to borrow a penny more than what an appraiser says a home is worth, so this saves you from having to come up with additional money that you can’t borrow.
Should You Waive Contingencies?
The decision to waive contingencies is a tough one, but ordinarily, it’s not a good idea. If you’re considering waiving contingencies so that a seller will accept your offer, or so that you can speed up a transaction, you should discuss your options with your real estate agent first.
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