For many home buyers, the contract and contingency period is the most stressful part of the home buying process. But it doesn’t have to be! By understanding what contingencies are and how they work, you can navigate this period with confidence. Read on to learn more about contracts and contingencies and how they affect the contract.
What is a Real Estate Contract?
Creating a real estate contract can feel like an intimidating process for many. Contracts are legal documents that help ensure all parties meet what was promised in a transaction. They typically include the purchase price, settlement date, deposit amount, what is included with the property, and specify the types of contingencies the buyers need. A key part of creating an effective real estate contract is educating yourself on what needs / should be included, what can be left out, and what each party has responsibilities for along the way. If done correctly, a well-drafted real estate contract should outline what both parties agreed upon in a clear manner so there’s never any doubt if things do go awry.
Write a Contract Yourself Vs. Hiring a Professional
When considering writing a contract for yourself versus hiring a professional, it’s important to know what the cost of using a professional is and what benefits are associated with it. While it may be tempting to want to do the job on your own, you should weigh what could be the consequence if it isn’t done correctly or completely. For example, do you know what disclosures need to be included in your specific area or property type? If you feel confident and comfortable doing the task yourself without any help, have all necessary information and documents on hand in order to create a legally binding agreement on both parties.
However, working with an experienced professional can be invaluable in avoiding any surprises throughout the transaction and therefore providing assurance that all steps / agreements are taken care of prior to settlement. Check out our partner brokerage for affordable and professional real estate services.
What Are Contingencies and Why Do I Need Them As a Buyer?
Contingencies are basically certain conditions or clauses that must be met before the agreement can move forward. The type of contingencies can range from appraisals to inspections to financing, but their purpose is ultimately the same: to give buyers an “out” in case anything unexpected comes up during the process that would make you no longer want the contract. Remember, it is illegal to purposefully submit an offer with contingencies under the assumption you can break it if you find something better. These are intended to be reserved only if something unexpected is revealed on this property throughout the transaction. Of course, how many contingencies you decide to include is up to you – just make sure that a balance between protecting yourself and forging ahead with the purchase is maintained. Too many may turn the seller off from accepting your offer, but too little may not offer you the protection you need. In the end, if done right, contingencies can be extremely helpful for both buyers and sellers alike.
Types and Examples of Contingencies
When it comes to the most common contingencies, you may be wondering just how many there are and if you even need them all. It’s true that there’s no one-size-fits-all answer for this question; however, most contracts contain a few of these agreements in order to protect yourselves. Some of the most popular examples include an appraisal contingency, home inspection contingency, financing contingency, and title search/clearance contingency. Depending on your individual circumstances and specific needs, your contract may call for additional contingencies – or you may not need any at all. Ultimately, it’s up to you and your legal advisor to decide what will work best for your particular situation.
More Contingencies Weakens the Offer
It’s well known that too many contingencies can weaken an offer and turn off a seller, so it’s important to make sure you’re only including what you absolutely need in the contract. You don’t want to clutter up your offer with too many conditions – too much paperwork is rarely interesting for anyone involved! That said, contingencies serve a purpose too: they keep both buyer and seller protected, so balance them carefully as you make an offer.
Contracts & Contingencies: Closing Thoughts
Now that you’re a real estate expert (wink, wink), understanding all the ins and outs of a contract shouldn’t be so daunting. A big thing to remember is that contingencies are your friend as they protect you during the home-buying process. More contingencies may weaken your offer but it’s better to be protected than sorry!