How can you safeguard your investment when buying or selling a home? Most do it through contingencies. Here are five contingencies that you can use to do this:
1. Financing contingency. This states that if anything happens that causes financing to fall through, you and your earnest money are protected.
2. Inspection contingency. The inspection contingency can be made up of many different inspections, but the most important is the regular home inspection and the radon inspection. You may also have a termite or well & septic inspection. None of these inspections are mandatory, but some are more recommended than others depending on the property.
3. Appraisal contingency. This is usually built-in automatically with a financing contingency. If you are paying cash, however, this contingency can protect you from overpaying. The lender is only going to lend what it appraises for. This also protects consumers from overpaying in a multiple offer situation.
4. Home sale contingency. These are quite common. When someone has a house to sell and want to buy a new home, they usually can’t afford two mortgages at once. This is where this contingency comes in. Some sellers don’t like this contingency, simply because it’s another hoop for them to jump through and risks that they have to go through the process twice. It’s a dice roll that not a lot of sellers want to deal with.
5. Home purchase contingency. This contingency mostly covers sellers. Many times, a home seller doesn’t want to be homeless between two transactions. With this contingency, buyers know that the sellers will have a defined amount of time to buy a home after they sell their home. It gives the sellers a bit of breathing room.
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