If you’ve ever purchased a home or have been perusing the market for a while, chances are good that you’ve encountered the term “contingency.” But just what is a contingent contract? A contract with a contingency on it means that an offer has been made on the home and the seller has accepted it, but the finalized sale is dependent upon certain criteria being met. So what are the different types of contingent contracts you might encounter?
Mortgage Approval Contingencies
A contract may have a contingency dependent upon whether or not the buyer is approved for a mortgage with the same terms and amount in the contract. These details may include a specific down payment amount and type of loan. I recommend seeking pre-approval through your mortgage lender to simplify this part of the process. With a pre-approval, you’ll be confident in the offers you make and avoid the nail biting that comes with waiting for approval once you’ve found your dream home.
Sale of Another Home Contingency
In many cases, buyers will not be able to purchase a new home until they have sold their current one. Contingencies based on the sale of the buyer’s own home are very common. Also in this case, sellers are still able to consider offers from other buyers who would be purchasing without a contingency.
Insurance Approval Contingency
Apply for insurance early in order to avoid a disaster with homeowners insurance. As a buyer, you can’t and shouldn’t close on a home without insurance on it. If the home cannot be insured for some reason, for example past mold claims, you’ll want to know this right away and avoid an insurance approval contingency or nightmare.
When you’re buying a home, it must appraise for at least the amount of the selling price. So, you may hear people say their home purchase is contingent upon an appropriate appraisal. If the appraisal comes in lower, you’ll have to renegotiate to have the seller lower the price or the buyer pay a higher down payment — either of which is designed to make up the difference.
In some cases, deals can be contingent on the buyer purchasing the home “as-is,” which is often the case in foreclosures. More commonly, you’ll see inspection-related project contingencies, with completion dates and requirements that the seller and buyer have agreed upon post inspection.
A few days before closing, you’ll take a final walk through to ensure the home is in the same condition as you last saw it. If there is a problem, the buyer and seller can negotiate or the buyer can opt out of the contract.
These are the most common examples of contingencies, but buyers and sellers can create all kinds of contingencies for their unique situations. Contingencies are common and a normal part of the real estate process in Northern Virginia and across the country.
For more tips and support when selling your home in Northern Virginia, contact me! And remember, when you list with me, I stage for free when we use your furniture! I’d love to partner with you on your next home buying and selling adventure.
Looking to buy or sell a home in Gainesville, Haymarket and Manassas? Call Realtor® Marcia Goodman at Sampson Properties at 703-819-4776.