Do Not Remove These Contingencies When Buying A Home
In a sellers' market like we have today, where homebuyers' demand far outstrips the availability of homes for sale in Long Beach, buyers are doing all they can to make their offers to buy more attractive than the competition. One way they do this is by offering to remove contingencies from the contract.
Contingencies are conditions one of the parties to a real estate transaction must meet in order for that transaction to proceed. There are certain contingencies that a buyer may be able to afford to let go of for negotiation purposes. Some contingencies, however, are vital to protecting homebuyers' interests and should never be used as bargaining chips.
A home appraisal tells you the value of the home you want to buy. It will tell you whether you're offering a fair price for the home or offering to pay too much. If the appraisal is too far below the price you've offered for the home, you can change your offer or back out of the deal altogether, if you wish.
The appraisal is also what the banks use to determine the amount and terms of the home loan to offer you. If the appraisal comes in too high, the bank loan you're offered may not be enough to cover your costs to buy the home, and, to proceed with the transaction in spite of that, you'll have to come up with the difference on your own.
A home inspection tells you what repairs, if any, the home will need in the short term to be safe and livable. If a home inspector finds a problem in a home, the seller can opt to fix it in order to proceed with the transaction, back out of the transaction, or negotiate with the buyer to either share the cost or change other terms of the contract, like the sale price, to compensate.
If you waive the home inspection contingency, then you could end up buying a home requiring one or more expensive repairs just to pass the local residential housing code and be livable to move into.
A loan or financing contingency makes your offer dependent on your ability to get a loan to buy the home at your offered price. If you're unable to obtain financing, you have the right to rescind your offer and back out of the deal.
If you waive the financing contingency, however, you could be required to fulfill the contract anyway, putting you in jeopardy of being found in breach of contract if you don't. The only instance in which you can safely waive this contingency, however, is if you're paying cash for the home.
Septic Systems and Wells
In rural properties, water for drinking and bathing may come from a well, and waste may be dumped into a septic system. These are both critical elements that make a home livable, without which you wouldn't be able to move in. If there's a problem with either the well or septic system in a home, it can be expensive to repair. If you waive this contingency, you could be forced to adhere to the contract and, then, pay for the repairs yourself.