If you’re a buyer in a hot seller’s market it can be difficult to secure a house. You can spend months looking at houses, write multiple offers, and lose every house. After a while it’s easy to become desperate to do anything you can to be able to close on a house. One of the things that many buyers consider is waiting their contingencies. But, is this a good thing to do?
Contingencies are included in offers to protect a buyer during a real estate transaction. Common contingencies include a home inspection, a home appraisal, financing clause, and more.
These contingencies make a possible for a buyer to walk away from a house and not lose their earnest money deposit if a problem arises in these areas.
With this in mind, here are some of the most common contingencies and information to help you decide if you should consider waiving or not.
Waiving this contingency is going to depend on your situation. If you are paying cash for the house then you don’t need to worry about financing and this is a contingency that you don’t need to include in your deal. That’s one of the reasons why sellers love working with cash buyers.
However, if you need to secure a mortgage in order to buy the house this is a contingency you will probably want to keep in your offer. This gives you an out just in case your mortgage application falls through. There are many unexpected things that can happen when your loan is with the underwriter, and you don’t want to be in a bad position if the lender denies your loan.
The home inspection contingency allows you to back out of the deal if the inspection turns up any unexpected problems. This is an important contingency that can have high risks if you decide to forgo it. There could be any of number of costly problems with the house and if you don’t have this contingency in place they all become your problem when you close the deal.
When the contingency is in place if there’s a problem found you have the opportunity to renegotiate the deal with the seller. If you don’t have the contingency, then the house is still yours.
Depending on where you live this might not be an optional contingency. Some areas and mortgage lenders will only allow a deal to close if the title is clean.
However, if you live somewhere where this was an optional contingency you still want to include it in your deal. Any problems with the title become your problem once you close on the house. That means any liens on the house remain even when the owner changes.
A contingency for an appraisal is usually required by mortgage lenders. They are unwilling to loan out more money than what a house is actually worth.
However, if your lender requires you to have this appraisal in place then what happens is you become responsible for the difference if the house doesn’t appraise for enough. If you have the cash on hand this may not be a big deal to you, but if you don’t it could be devastating.
Waive all contingencies in order to buy the house of your dreams is not always a good idea. Really consider your situation and how the contingencies are protecting you as the buyer. If you are in a position where you don’t need this protection then you can waive the contingency. But always think through the possible consequences before you do so.