Contingencies May Complicate Offers & Move Deals Forward. Here’s How.
When you’re buying or selling a home in Texas, contingencies can come into play. In fact, when offers are made and negotiations start, you could encounter contingencies that add a whole new layer to the deal.
That can work in your favor if you know what contingencies are — and how to best leverage them to make them work for you.
What Is a Contingency in Real Estate?
Contingencies in real estate are simply terms of the deal that let one party withdraw or cancel the transaction IF certain factors arise. Since real estate deals are often complex, contingencies can address specific concerns and needs while adding a level of protection or assurance early on.
With real estate contingencies, it’s crucial to know that:
- Buyers tend to propose and include contingencies.
- The word “IF” is fundamental to — and included in — contingencies.
- If the terms of a contingency are not satisfied, the transaction will typically fall through.
- Contingencies are NOT required. You can buy or sell a house with zero contingencies involved.
Top 5 Contingencies When Buying a Home in Texas
Will you need — or need to deal with — contingencies when you’re buying or selling a home in Texas?
Maybe. It depends on the deal, your needs, and who else is involved in the transaction. Regardless, if contingencies are necessary, here are the most common ones that tend to arise, and here’s why.
1. Financing Contingencies
Buyers can include financing contingencies when they do not yet have a mortgage loan to complete the purchase. With this term, buyers can back out of the deal — and generally get their earnest money back — if they are not able to get financing by some specified date.
When a financing contingency is in place:
- The deal will proceed to the next stages only IF the buyer can get financing. Generally, that’s established with a mortgage commitment letter from the lender.
- The deal falls through IF the buyer doesn’t get approved for a mortgage loan by the specified deadline.
2. Home Inspection Contingencies
Home inspections can uncover issues with the foundation, plumbing, electrical system, and other less visible components of a house. As a result, many buyers make the purchase agreement contingent on the results of the home inspection.
With home inspection contingencies, major issues revealed in the inspection report could be triggers for:
- Renegotiating the purchase price or certain repairs that need to be completed by the seller
- Canceling the transaction, with earnest money going back to the buyer
3. Appraisal Contingencies
Similar to the home inspection contingency, the appraisal contingency can hinge the transaction on the findings of the appraisal report and what value comes back for the home. Commonly, appraisal contingencies will specify that:
- The deal will only proceed at the agreed-upon price IF the appraisal values the home at or above that agreed-upon price.
- The buyer may renegotiate the price or back out of the deal IF the appraisal values the home at less than the agreed-upon purchase price.
4. Sale Contingencies
When buyers are selling another home, they can include sale contingencies in purchase agreements. This essentially states that the transaction will only proceed IF the buyer can sell a house they own first. In other words, if the buyer is not able to sell some property by a specified date, they could back out of the deal with a sale contingency in the offer.
5. Title Contingencies
Liens and other title issues may not be discovered until late in a deal, which is why some buyers include title contingencies in their offers.
With these contingencies, the buyer usually stipulates that:
- The seller is responsible for removing or addressing any title defects that arise in the title search.
- If title defects can’t be resolved, the buyer has the option to exit the deal, without penalty and with the return of any earnest money.
Real Estate Contingencies: The Bottom Line
With contingencies in Texas real estate, the bottom line is that:
- These terms may not always be a factor in a deal. If they are, however, you need to be very clear about what the contingency stipulates — and you need to fully understand what it means and how it applies to your needs and situation.
- Buyers can choose to waive all contingencies in sellers’ markets. This strategy can be risky, but it may give buyers an upper hand whenever there are competing offers that all have contingencies.
- Real estate contingencies can help buyers and sellers make deals, especially as they’re gathering all of the information or resources they may need to proceed.
- Whether you need to include, review, or work with contingencies in a real estate deal, it’s usually in your best interests to work with an experienced Realtor®.
Ready to Buy or Sell a Home in Texas? Get Help & Get CASH BACK at Closing
The right knowledge and a little help can go a long way toward helping you make the best deal on your next real estate transaction in Texas. So can the experienced Realtors® at New Home Gurus of Gurus Realty.
In fact, whether you’re buying or selling a house, we can guide, advise, and support you through the process, helping you with contingencies, offers, negotiations, and closing. Plus, we’ll split our commission with you at closing.
Homebuyers and sellers who work with New Home Gurus can get back an average of $4,500 to $12,000 at closing.
How Much Cash Can You Get After Closing?
Call (281) 668-8124 or Contact Us to Find Out Now
We are standing by, ready to answer your questions and explain the details of our commission-sharing program.