When buying a Havasu home, most offers include a contingency or two. This protects the buyer and their earnest money deposit in case certain criteria have not been met by the close of escrow. But in a seller’s market, buyers need to keep these contingencies to a minimum. Otherwise, they run the risk of a rejected offer. Even so, buyers still should consider including one or more of these common contingencies when negotiating a purchase.
Common Contingencies for Home Buyers
One of the common contingencies we see buyers use when borrowing money to finance their home purchase is an appraisal contingency. A lender refuses to approve a loan that exceeds the appraised value of the property in question. They require an appraisal as part of the loan process. So, if the appraisal comes back at less than the sale price, a buyer has two options. Either, you renegotiate the sale price or you walk away. With an appraisal contingency, you walk away with your earnest money deposit. Without one, you lose it.
Home Inspection Contingency
We often see a home inspection contingency as one of the common contingencies home buyers utilize. In fact, I highly recommend that you include this in the negotiation of the sale. Why? Because this allows you to bring in a pro to examine the property for potential issues that a cursory walk-through may have missed. Major home repairs hidden to a novice’s eye could cost thousands of dollars. A professional inspector not only identifies potential issues but tells you how serious they may be and whether or not these are issues to be addressed right away. Oftentimes, we take the results of the home inspection to the negotiation table. This could result in a reduction in the sale price or a repair requirement to complete the sale.
Finally, buyers may request a mortgage contingency. Unless you pay all cash for the property, you need a loan. Most sellers do not even entertain an offer without an approval letter from a lender. Even so, your mortgage may fall through at the last minute. With the mortgage continency, you and your earnest money are protected if that happens. you don’t want to commit to a property sale without having the money to back it up. Without it, the seller may still hold you legally responsible for the purchase of the property. Talk to your Lake Havasu REALTOR® to determine whether or not to include contingencies for any or all of these in your negotiations.