Why Waiving Contingencies Is a Risky Move for Home Buyers
No home buyers should make an offer on a house without first considering what contingencies to include. Contingencies can cover a variety of things when buying a house – from when the buyer can move in to the buyer having the ability to back out of the deal if the inspection comes back bad. They are used to protect the parties and help them avoid making huge mistakes during the sale.
Rules of Homeowner’s Associations
Most homeowners that are in a neighborhood with a homeowner’s association will provide a copy of the rules. A potential buyer should look through these rules carefully to determine if they can follow them. Any rules that could cause potential problems should be an indication that the neighborhood is not right for the buyer.
Since a homeowner should look through these rules before making an offer, it is easy to do away with a homeowner’s association contingency. There is no need to fall back on a contingency if the problem has already been diffused.
Moving-In
In some situations, the buyer needs to be out of their previous home before the closing day can occur. Some sellers and buyers have agreed to allow the buyers to move into the house before the purchase is complete. It is a strange situation, especially if something goes wrong.
If the deal falls through the buyer must find another residence and move all of their belongings out of the house. The buyer also loses the ability to negotiate. Once their belongings are in a house it is unlikely they are going to walk away from a deal if the seller does not agree to their terms.
Having this ability, or contingency, does the buyer little good and can be waived quite easily if they have another residence.
Appraisal Price
Having the appraisal contingency in place can be helpful to a buyer that does not have extra funds laying around. A house that appraises less than what the buyer offered can be a tricky situation. The lender will not give more money than what the house appraises for so the buyer is left to pay the rest of out of pocket.
With this contingency in place, the buyer can back out of the deal and get their escrow money back. If this contingency has been waived, they are stuck trying to find a way to pay the difference. Or they can back out of the deal and lose the money that they have already put into the escrow account.
The Inspection
The home inspection contingency is one of the more important ones in terms of saving the buyer a lot of money. With this contingency, they may decide to walk away from a deal if the inspection comes back with too many problems. They may also ask the homeowner to make repairs on certain items before the sale can be complete.
Deciding to go without this contingency can leave the homeowner heartbroken when their new home starts to fall apart around them. The inspection is there to let the buyer know any and all the problems that could occur. It gives them a better view of the house and its structural integrity. Going without this contingency is a huge risk for home buyers.
Title
Of all the contingencies that can be waived, the title contingency is the one to stick with. Always check the title of a property before making a purchase. This will show who the owner of the home is and if there are any outstanding liens on the property. In many areas, waiving this contingency is not a legal action a buyer can take.
Contingencies are there to make the buyer’s life easier in the event something unexpected is discovered. Buyers want to waive contingencies to make their offer more desirable for a seller. However, this can backfire if the contingency could have saved them from buying a house with many problems.