Buying a house is a much more in-depth process of simply swiping your card. In fact, there are lists of contingencies and disclosures to keep in mind for your own safety. As defined, contingencies are clauses that are included in a contract to allow one to back out of a contract if certain conditions are not up to terms. As well as disclosures, which are a seller’s main responsibility to reveal property details to the buyer. Together, these two main components protect the buyer and the seller from financial and obligatory harm.
The Full Meaning of a Contingency
Contingencies are best thought of as a “cause and effect” proposition. The contingencies main job is to prevent the buyer from getting stuck buying a house if it is not up to their standards. So, when looking through real estate offers, always make sure that there is a contingency in place.
One of the most common ways a contingency comes into play is through financing. For example, if you put an application in for a specific home, but do not qualify for a home loan, you won’t be in charge of paying for the home out of your wallet if your application is approved.
Another example of a common contingency placeholder is when your new home is being professionally inspected. After your new home is checked by an inspector, any abnormalities or factors of your home that are not up to code can be resolved via an inspection contingency which makes the seller pay for the repairs.
Contingencies That are Out of Your Control
Reasonable ways a contingency may entirely be out of your control is during the time a lender approves your loan or if your home’s appraisal comes with a more than sufficient value. Another example is home insurance in which you would need to inquire in case you have to approve the property for certain coverage that you cannot control.
What Can You Control When Buying A House?
You should also get your home inspected. This way, you can back out of the deal if serious issues are discovered. If significant improvements are necessary, you may be able to renegotiate the sale price. Sometimes buyers opt in for a pre-inspection report before even making an offer.
If you want to reduce the number of delays when you are closing the deal, you may choose to accept the house “as is.” You can do this by letting a contingency deadline pass. In the worst case, the sale can be canceled. This is only allowed when one party violated a contingency.
What Is Wrong With The Property?
When buying a house, the seller must disclose all known environmental hazards, damage, defects, and homeowner association issues before the sale. These are known as disclosures. This point marks an important juncture in the home buying process and is the first opportunity to opt-out. Disclosure laws are different in each state and sellers are not required to tell you every nuance or nuisance of the property. Your agent should get the required disclosure documents for you a few days after the signing of the sales agreement. If you do not receive these disclosure documents, you can choose to pursue legal action.
The background of a property can tell a lot about a number of conditions from minor nuisances to on-site deaths. Unfortunately, it can be difficult to know what conditions the owner is legally required to tell you. Thanks to local and national laws, you may need a lawyer to figure it out. Here are the four main types of disclosures.
- Standard Disclosures: A majority of state regulatory bodies provide checklists of common issues for owners. They can indicate what is a problem and what is not. These forms only include major issues, not details of homeowner association obligations, stigmatized properties, or missing mechanical parts.
- Natural Hazards: The document will lay out environmental hazards like flood, fire, and earthquake zones.
- Lead Paint: In accordance with federal law, if a house was built prior to 1978, the owner must disclose the use of all known lead-based paints in the home.
- Sold “As Is” Exemption: Sellers are required to disclose all known defects of the property. In an “as is” transaction, the buyer is waiving their right to charge the seller for any repairs, replacements, or other changes, no matter what is found in the inspection. This is a gamble for the buyer.
Keep Track Of Time
Keep a close eye on your contingency deadlines so you don’t miss any crucial dates. Create a calendar of all your deadlines to help you stay on top of things. You may also want to consult with an agent to help you through the process or, in more complicated cases, an attorney. They can explain some of the jargon and provide solid advice.