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3 contingencies to use when buying a home

On Behalf of | Jul 11, 2024 | Real Estate

If you are buying a home, it is important not to let the excitement of finding somewhere get the better of you. You may have spent months searching before finding a place, so be keen to rush ahead and secure the property before someone else does.

Yet doing that could leave you with serious financial problems. This is where contingency clauses can help protect you. They allow you to secure the property but still back out without penalty for certain reasons. Here are some to think about including:

1. Funding contingency

You probably cannot buy the house without certain funding falling into place. For example, getting approved for a mortgage from the bank or by first having the sale of your current home going through, which would free up funds. Lenders can change their minds or alter the terms they initially promised, which may leave you financially unable to continue with the purchase of the property. A properly written contingency clause can allow the buyer to back out from purchasing the property when these unexpected issues arise relating to the funding.

2. Survey contingency

You should always have a professional survey before buying a property. Surveyors can turn up all sorts of issues you might not have considered or noticed. Some of these issues might be costly and cause you to not want to follow through with the purchase of the property, or may render you unable to due to the extra costs to fix the issues on your end. Provided that you write the contingency correctly, it could allow you to back out or renegotiate when a surveyor turns up a surprise that was not initially considered or was not discovered on your first walkthrough.

3. Title contingency

You should always check that the person selling the house is the rightful owner and that no one else has a claim on the house. That could be an individual or a bank that placed a lien on it. You also need to verify the boundaries are correct and understand the situation regarding any easements that may exist, which would allow another person or entity to use a portion of your property. If a title report reveals that the person selling the house is not the rightful owner or that the property you think you are buying is not actually what you are purchasing, then a good title contingency clause can assist with this and could allow you to recover your deposit paid and cancel the purchase of the property. 

Learning more about the contingencies you need will improve the chances that you walk away with a property you are glad to buy.