When interested in purchasing a home, to show the seller you are a serious prospect and have access to funding, buyers typically submit a formal offer contract. An offer contract on a house often includes basic information about the buyer, seller, and property, the amount of the offer, a deposit, and proof of funding. These are meant to make the seller feel good about the transaction. To put the buyer’s mind at ease, it is common to include contingencies, or conditions that must be met in order for the deal to go through. Here are three common contingencies you might find in an offer contract:
Clear title:In the unusual occurrence that the title wouldn’t be clear, and therefore the buyer might not be the rightful owner to the property, the buyer is obviously going to want to get out of the contract.
Home Inspections:Often buyers put in offers on a home before taking the time to do a full home inspection. Minor repairs can be fixed by the homeowner before closing, but if there is something in the inspection the buyer is unhappy with, a contingency protects them with an out.
Mortgage Financing:Although most buyers get pre-approved for loans before putting in home offers, sometimes the loan can fall through. If the buyer lacks proper funding, they certainly will not be able to purchase the house.
While all three of these contingencies are unlikely, in real estate purchases there are many processes in place, such as contingency and escrow, to provide all involved parties with the most security possible. To learn more about concepts related to title, see our Investor Resources.