When a buyer makes an offer on a home, they'll usually include a number of clauses in the contract. These clauses, also known as contingencies, help protect the buyer at various stages of the home buying process. These clauses enable the buyer to walk away from the deal penalty-free, if certain conditions are not met. These protections enable the home buyer to determine for certain that the house they want to buy is right for them.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.

Home Sale Contingency

The home sale contingency is the clause that states the purchase of the house will only go through if the buyer is able to sell their existing home. If the existing home doesn't sell, then the buyer can usually back out of the contract. This is a common contingency that home buyers pursue if they already own property, but many sellers may not be pleased when they see this contingency on their home purchase offer.

The home sale contingency opens up the home seller to quite a bit of risk. Since the home will need to come off the market while the buyer attempts to sell their own home, many sellers may not accept an offer with this clause in the contract. Buyers who want to include this contingency in their home purchase contract should do what they can to sweeten the deal, in order to keep home sellers interested.

Financing Contingency

The financing contingency is the contingency that enables home buyers to usually walk away from the home sale if their mortgage doesn't fund. The financing contingency is the last contingency to get waived before the home is purchased. If the home buyer fails to include a financing contingency in their home buying contract, they can lose their entire deposit.

The financing contingency is what gives Dickinsfield home buyers who pay in cash a serious advantage over home buyers with a mortgage loan. Buyers who pay in cash will automatically have the funds and will not use the lack of funds as a reason to cancel the contract. Home buyers who include this clause in their contract may need to make other accommodations to make their offer more attractive, especially in a seller's market.

Appraisal Contingency

Before a home buyer's loan can fund, the home being purchased will be appraised. If the home doesn't appraise at the purchase price of the house or higher, the bank or mortgage lender may adjust the amount of the loan to account for the lower value. When this happens, the home buyer might be expected make up the difference in cash in order to pay for the home. If the home buyer is unwilling or unable to provide more money for the down payment, the appraisal contingency allows the home buyer to renegotiate or cancel the contract.

Home Inspection Contingency

Most buyers get a home inspection on the home they are buying. The home inspection may reveal hidden problems like structural issues, heating, electrical, plumbing, roof problems or other issues. The home inspection contingency is the home buyer's protection against possible problems after they purchase the home. If the home inspection does turn up big problems, the home buyer may request that the seller either make the necessary repairs or renegotiate the purchase price. If the seller is not willing to do either of these things, then the buyer can usually back out of the deal.

The home buying clauses are in place to protect consumers against issues that may arise with the home buying process. The more a home buyer knows about the home buying clauses, the better prepared he or she will be for the home buying process. For more information about contingencies, talk to a real estate agent.

For informational purposes only. Always consult with a licensed real estate professional before proceeding with any real estate transaction.