Types of Contengencies of Home Buying

When buying a home, contingencies are conditions that must be met for the sale to proceed. If these conditions aren’t met, the buyer can back out without penalty. Here are the main types of contingencies in home buying:

1. Financing Contingency

• Protects the buyer in case they are unable to secure a mortgage.
• If the loan isn’t approved, the buyer can withdraw without losing their earnest money.

2. Home Inspection Contingency

• Allows the buyer to hire a professional inspector to check for issues.
• If major defects are found, the buyer can negotiate repairs, ask for a credit, or walk away.

3. Appraisal Contingency

• Ensures the home is valued at or above the purchase price by a lender-approved appraiser.
• If the appraisal is too low, the buyer can renegotiate the price or back out.

4. Sale of Current Home Contingency

• The buyer’s purchase depends on selling their existing home first.
• If the buyer’s home doesn’t sell within a specified time, they can cancel the contract.

5. Title Contingency

• Ensures the seller has clear ownership (title) of the property.
• If title issues arise (like liens or disputes), the buyer can back out unless they are resolved.

6. Homeowners Insurance Contingency

• Requires the buyer to obtain insurance before closing.
• If insurance is unavailable or too costly (e.g., due to flood or wildfire risks), the buyer can withdraw.

7. Homeowners Association (HOA) Contingency

• Gives the buyer time to review HOA rules, fees, and regulations.
• If the HOA terms are unfavorable, the buyer can cancel the purchase.

8. Kick-Out Clause (for Sellers in Contingent Offers)

• Allows the seller to continue showing the home and accept a better offer if the buyer has a contingency (like selling their current home).

Each contingency has a deadline, and buyers usually negotiate which contingencies to include. Removing contingencies can make an offer more attractive, but it also increases risk. Would you like help understanding how contingencies apply in your market?

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