When you begin house hunting, you’ll obviously start your search online. You’ll probably view dozens to scores of homes, selecting a few to see in-person. Touring open houses can be exciting, especially when they contain most or all of your wish list items. Once you’ve narrowed down your favorites, you’ll make a final decision based on location, price, size, function, and style. After reaching a decision about which property you like most, you’ll ask your real estate professional to submit a purchase offer. This is typically an anxious time, waiting to hear back if the seller accepted, counter offered, or outright refused. Of course, you’ll want it to be accepted, but, before you submit it, there are key purchase offer contingencies that should be included.
Most Important Purchase Offer Contingencies
The road to homeownership is one that takes time and should not be rushed. Long before you begin searching local real estate listings, you ought to have your finances in order. Months before you apply for a home loan, pull your credit files from TransUnion, Experian, and Equifax. It’s not uncommon to find credit report errors, as a report by 60 Minutes discovered, about 40 million files contained errors, and 20 million contain significant errors. In addition to disputing errant line items, you should be saving money for a down payment, earnest money deposit, and inspections.
The standard home purchase contract lists several conditions that must be met before the closing will take place, covering issues like financing, inspections, insurance, and more. These conditions are called “contingencies.” They’re important to give you (the homebuyer) an out if, for example, your financing falls through or other uncontrollable events or discoveries create barriers to your finalizing the deal. Remember, buying a house isn’t like buying a television, where you can return it within 30 days if you don’t like it. Once the deal is done, it’s pretty much done. So it’s worth investigating whether you’re doing the right thing and creating contingencies allowing you to make these investigations before the purchase is finalized. —Nolo.com
It’s also a good idea to reduce your debt to lower your debt-to-income ratio. Once you’re prepared, shop various lenders and mortgage loan products. Right now, home loan interest rates are still near historic lows and qualification standards give more consumers opportunity to purchase a home. Be smart about what you do so you aren’t denied for a home loan. Also, to prevent unpleasant surprises when you submit a purchase offer, be sure to include these contingencies:
- Financing. In your purchase offer, you should include terms about the financing. Since most people must obtain a mortgage to buy a home, you need to include specifics about your financing terms. It should contain the mortgage amount and interest rate. This will protect you if rates rises before the home loan is finalized, preventing your monthly obligation from being larger.
- Appliances. The purchase offer should include which appliances are to be left in the home. Every appliance that is verbally agreed to be included in the purchase ought to be in writing. Don’t assume the seller will just leave some or all of the home appliances behind.
- Inspections. Your purchase offer should state the sale is contingent on passing a home inspection, pest inspection, and wind mitigation inspection. If the home does not pass any one of the inspections, you can reclaim your good faith deposit and walk away, or, work out a compromise with the seller.
- Closing date. A settlement date or closing date is usually set 30, 45, or 60 days out from the day of purchase offer acceptance. Though a specific date will be set, it isn’t unusual for it to be changed due to circumstances you face or the seller experiences.
- Sale of current home. Of course, one of the most notable purchase offer contingencies is the sale of your current residence within a certain time frame, generally between 30 days and 60 days.
In addition to these contingencies, you need to include specifics about who will pay the closing costs, in-part or whole. Before you submit a purchase offer, go over it with your buyer’s agent to ensure all necessary clauses and contingencies are included.