Home Buying Contingencies

Will it pass the home inspection and appraisal?

When you're buying or selling a house it's important to understand the different type of home buying contingencies that can impact whether or not a purchase agreement is likely to result in an actual purchase transaction.


Unless the buyer plans to pay cash for the home, when a buyer submits an offer to purchase a home the offer is written contingent upon the buyer's ability to secure financing for a home. The buyer is held to the terms of the agreement only if he or she is able to get approved for a mortgage to purchase the property.

Funding approval may be impacted by the buyer's creditworthiness and the appraised value of the home. If the home doesn't appraise high enough to cover the requested mortgage amount a lender will not approve a mortgage, even if the buyer qualifies for funding. Lenders also have the right to refuse to fund homes that have active termite infestations.

Sellers usually insist on placing a strict time limit on how long the buyer can take to get approved for a loan. This protects the seller in the event that the individual isn't able to get a loan approved within a reasonable period of time.

Home Inspections and Home Buying Contingencies

Offers to purchase are often made subject to the findings of a home inspection. Home inspections aren't required by law, but many buyers insist on including this contingency in their offers to purchase. Getting a home inspection can protect the buyer from committing to purchase a property before finding out specifics about its condition.

Once the home inspector submits his or her report, the buyer can decide whether or not to accept the home in its current condition or instead request that the homebuyer perform certain repairs or improvement as a condition of moving forward with the sale.

The seller can accept or reject the buyer's requests. If the seller doesn't agree to make improvements per the inspection, the buyer can opt out of the contract without penalty. If the seller does agree to make the improvements, the details are added to the purchase agreement in the form of an addendum and the repairs become additional home buying contingencies.

Completion of Required Repairs

If any repairs or upgrades were included in the purchase agreement as home buying contingencies, the seller must finish them prior to closing. The buyer has the right to conduct a final walk-through of the property immediately prior to closing to verify that the home is in the proper condition and that all repair and replacement contingencies have been completed.

Clear Title

In order for a real estate transaction to be completed, a title search must indicate that the current owner does in fact have the legal right to sell the home. Sometimes title searches reveal problems such as contractors' liens, issues related to prior homeowners, and unpaid tax liens. Until such problems are cleared up the seller cannot legally transfer title of the property to another person.

First Right of Refusal

Buyers will sometimes place an offer on a home that they cannot afford to purchase until their current residence is sold. In situations like these, the offer to purchase is described as a contingent offer. Sellers will generally accept such an offer only if the agreement is phrased as a first right of refusal offer.

If a first right of refusal contingent offer is accepted, the prospective buyer basically becomes first in line to purchase the home. If the buyer's current residence sells before the seller receives another offer, the purchase agreement is executed as written.

If the seller receives another offer, the buyer will no longer be able to wait an extended period of time to purchase the home. The buyer can execute his or her right to purchase, but the transaction must move toward closing right away. Typically, first right of refusal contingencies are written such that buyers must produce a means to purchase the property in less than a week, or the seller is able to accept the second offer.

Finalizing a Real Estate Transaction

The process of getting to the closing table for a real estate transaction isn't always a smooth one. Dealing with such a high dollar transaction can be very stressful, particularly when the sale is based on a number of different contingencies. Fortunately, buyers and sellers who rely on the services of trusted Realtors, mortgage professionals, and closing agents can rest assured that their contingencies are being handled by knowledgeable professionals who have their best interests in mind.

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Home Buying Contingencies