In Part 1 we reviewed common contract contingencies found in a typical real estate contract. Now we’re going to discuss home contingencies that you should never waive.
The first and most important contingency that you should never waive is the title contingency. All contracts have a clause requiring that the seller deliver clear title to the property to the buyer. Clear title means that there are no liens or mortgages left on the property once it transfers from one owner to another. If you waive this contingency you will be responsible to pay any outstanding liens or mortgages the seller decides to leave attached to the title.
Next, don’t waive the inspection contingency. An inspection contingency gives the buyer a specific time period to have a home inspector come and look at the home to make sure there are no serious defects or issues that need to be addressed. In most contracts, should something be found the seller has the chance to fix it or either party can decide to walk away from the deal.
If you are a home builder or contractor and have the knowledge to address problems yourself, this contingency is a serious protection for the buyer. To many things can be easily hidden from the average buyer’s sight. Can you see electrical issues inside a wall? What about a pipe drip that is slowly causing mold issues? Is that crack in the basement a superficial one or a foundation issue? Don’t take a chance.
The appraisal contingency allows the buyer to walk away if the home appraisal comes back lower than the price agreed upon. Most banks and mortgage companies require this and should the appraisal be short, they won’t write a mortgage for the property, or will but only if the buyer puts up a serious cash down payment.
If you waive this contingency, you will be required to purchase the property whether you can get financing or not.
Which leads to the financing contingency. Unless you can pay all cash for a property, you will be getting a mortgage to secure the purchase money. What if you can’t? For whatever reason, do you want to be contractually required to buy a home that you don’t have the money to pay? Of course not. So don’t waive this one!