Some home contracts include special clauses or buying contingencies that stipulate what actions or circumstances must fall into place in order for the contract to become valid. These often come into play when buying or selling Pasadena luxury homes. When it comes to effectively buying or selling houses for sale in Pasadena, you should have a basic understanding of what buying contingencies are so that you aren’t caught off guard if they show up in the contract. This article will tell you about five common buying contingencies that you may encounter when buying or selling a home.
1. Inspection contingency
Some buyers will order an inspection on Pasadena luxury homes before agreeing to a sale. However, an inspection most often happens during the option period, which is usually the following ten days after an initial offer is agreed upon. A home inspector will thoroughly look over the interior and exterior of the home and note any structural, foundational, or mechanical concerns. The inspection contingency allows the buyer to walk away from the sale or renegotiate the price, depending on the results of the inspection. The buyer may also ask the seller to perform certain repairs that the inspection shows as necessary. In some cases, the buyer may waive the inspection contingency when making an offer on a sought-after home in a hot market.
2. Title contingency
The home title gives the homeowner the legal right to the property. As such, when a home is sold, the title has to switch from the previous owner to the new owner. Before this happens, a title company will do a thorough public search to confirm that the seller has legal rights to transfer ownership of the land and the home. If they discover that there are other claims to the title, the sale cannot proceed, and the buyer can walk away from the deal without penalty.
3. Financing contingency
The financing contingency allows the buyer to walk away from a deal if they are unable to secure the necessary loan to purchase the home. Contrary to popular belief, being pre-approved or pre-qualified for a loan does not guarantee that you’ll receive that particular loan. Once you formally apply for a home loan, you’ll go through a specific underwriting process where the loan administrator may discover something that prohibits you from receiving the loan that you need. Should this happen, the loan company or lender will provide you with a list of conditions that you must meet in order to receive the loan that you need to buy the home. If you’re not able to take care of each of these issues, you can walk away from the deal.
4. Appraisal contingency
Before a home sale is completed, the home must go through an appraisal process. A local professional will visit the home to confirm that the home is selling for an acceptable market price based on recent sales in the area. The appraiser will issue a report to both the buyer and lender detailing their findings and providing a fair market price for the home. The lender cannot lend a greater amount than what the home is worth, which makes the appraisal price important. If the lender has to foreclose the loan at some point, they need assurance that they can get back the money they spent on the home, and if they lend more than the appraiser says the home is worth, it’s unlikely that they can recoup their losses. A buyer can waive the appraisal contingency if they are paying in cash since a lender won’t be involved.
When houses for sale in Pasadena appraise for less than the sales price, this doesn’t necessarily mean that the deal will fall apart. There are a few things that either side can do in this situation. The buyer may order another appraisal, or they can increase the size of their down payment to bridge the gap between the sales price and the appraisal price. They can also renegotiate with the seller to agree upon a price closer to what the appraisal said the home is worth. The seller may also choose to fix problems mentioned in the appraisal report. In some rare cases, sellers may explore seller financing, but there are limits that you may want to first explore with the lender to ensure that this is a realistic option.
5. Home sale contingency
A home sale contingency allows the buyer to walk away from a home purchase if they are unable to find a buyer for their existing home. This protects the buyer from finding themselves in a situation where they are buying a new house while still in possession of their old house. This is the riskiest contingency for the seller because there’s no way to know whether or not the buyer’s original home will sell. However, there’s also no obligation for the seller to accept this type of contingency, so the seller has the choice of whether or not to include this clause from the beginning.
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While there’s no guarantee that any of these buying contingencies will show up in your next contract, you will be prepared for what’s ahead when you keep this information handy. Before you enter the market for Pasadena luxury homes, it’s wise to think about who’s going to be with you to help throughout the process. Many people enjoy greater success when buying or selling houses for sale in Pasadena when they work alongside an experienced realtor. Consider reaching out to The Middleman Team before you begin searching for a new home or before you put your existing home on the market. Meg’s 30 years of experience in the local market speak to her credibility and expertise. She would love to be an asset and a resource for you as you prepare to sell or buy.
