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Do you have the right contingencies in your purchase contract?

Are you planning to make Waukesha your permanent home? Have you found the right house and are ready to put in an offer? Before you do, you may want to consider the conditions under which you would want to get out of the deal.

You may be wondering why you would even want to back out of the purchase. After all, you wouldn't put in an offer unless you wanted the home. Well, any number of things can go wrong when you make this kind of purchase, and you may need the freedom to walk away.

What kinds of contingencies do you need?

When you enter into a purchase agreement for a home, you may want to make sure that you include the following contingencies, which would allow you to walk away from the deal if necessary, perhaps without any penalties:

  • Under some circumstances, you may not be able to get homeowners' insurance, which would probably prevent your lender from loaning you the money you need to purchase the home.
  • You may want to specify that you will only go to closing if you receive certain terms for your mortgage loan. For instance, you may not want to pay over a certain interest rate.
  • You may need the closing date to fall within a certain period. If it can't close when you need it to, you would want the option to walk away.
  • The appraisal may not indicate that the home is worth what the seller asked you to pay for it. You certainly wouldn't want to pay more than necessary, and your lender would probably agree and not provide you with the funds unless the price dropped.
  • If you already own a home that you are trying to sell, then you may want to include a contingency that the deal only closes upon the sale of your current home.
  • If an inspection of the property reveals major defects, you may not want to purchase the home unless you knew going in that it was "as is" and a fixer upper.
  • Perhaps you discover issues with the home on the final walk through, which usually takes place within days of the closing, and the seller is unwilling to work with you on repairs.

If your particular circumstances require additional contingencies, you may want to make sure they are included as well. The hope is that nothing goes wrong with your purchase, but contingencies provide a kind of insurance policy for you. It would be a good idea to think carefully on what situations would cause you to want to cancel the purchase. Of course, the seller has the right to negotiate, so you may want to be prepared for compromise or some other arrangements.

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