You searched and searched the Lake Havasu real estate market and finally found a home you love. Now, you must put together your offer to present to the buyer. In it, you might want to include a contingency or two (conditions of sale) to protect yourself in case something goes wrong. If the contingencies in the sales agreement are not met by the close of escrow, you can cancel the sale and get your earnest money deposit back. But you do not want to overwhelm a seller with too many of these conditions. Otherwise, they might not accept your offer. Here are a few common contingencies home buyers ask for (and many sellers expect to see).
Common Contingencies a Home Buyer May Ask For
No responsible professional would ever suggest waiving a home inspection. This allows the buyer the chance to hire a third-party (unrelated to the seller) to examine the household for potential issues (mold, pests, water damage, etc.). Even with a newly constructed home, you should consider hiring a home inspector to check it out first. A home inspection contingency grants you the opportunity to walk away if the inspector finds major issues you are unwilling to tackle after you become the new owner.
If you pay cash, you may not need to include this. However, a lender requires an appraisal as part of the loan process. They do not grant loans above the appraised value. If the appraisal comes in under the agreed sale price, you either need to come up with the difference yourself or you might need to renegotiate the sale price. Sellers are not too keen on that (as you can imagine). But this is one of the common contingencies we see in real estate transactions. A home appraisal contingency protects you in case it comes in under the sale price. Also, the appraisal fee and the home inspection fee are both considered “hidden fees” to include in your costs when budgeting to buy a home.
Speaking of money…the financing contingency. Again, if you pay for your home with all cash, waive this contingency. The seller will love you. But, if you need to finance your loan, you might want to include this in your sales contract. With a financing contingency, you get to walk away if your financing falls through. You may need a pre-approval letter before you start looking at homes. Many sellers won’t even look at an offer without one. And your REALTOR® might not even allow you to submit an offer without one. To make your case even stronger, try to get a pre-approval to underwriting.
Finally, what if you need to sell your current Havasu home in order to qualify for a loan to buy a new one? The last one of the common contingencies buyers usually include in their sales agreement is the home sale contingency. This allows you a certain amount of time to sell your current home. If you have not sold it by that time, you can withdraw your offer and get your earnest money deposit back. One way to avoid this contingency is to sell your current home before you start looking for a new one. That may mean renting for a little while. But that does give you time to look for the right Havasu property without trying to juggle a home sale and a home purchase at the same time.