If you are looking at buying a new home in an Illinois neighborhood, you should be aware of real estate contingencies, since they may protect you from buying a home that has problems. A contingency is a provision in an Agreement of Sale that needs to be met or the buyer can back out of a purchase. Here is a look, per Forbes, at some of the most common contingencies home buyers use in real estate purchases.
Some contingencies involve the status of the title. A property title is a record of current and previous owners of the home. Homebuyers use title contingencies so that if it is discovered that title ownership is contested or if liens are found on the home, a buyer can depart the sale. Similarly, an inspection contingency provides you a way out of a purchase if inspections find problems with the home and the seller is not willing or able to repair them and you decide not to handle the problems yourself.
Mortgages are a primary reason people choose to place a financing contingency with their bids. Not everyone has a loan fully approved when they make a bid to buy a home. Although a buyer may possess loan preapproval, this is not a guarantee of the loan going through. The buyer still has to apply for a loan and go through the underwriting process. In the event a bank does not approve your loan, a financing contingency allows you to depart the sale.
Some home buyers come to an agreement with the home seller for a particular price on the home, only for an appraisal of the fair market value of the home to produce a number lower than the agreed upon amount. Since mortgage lenders generally provide loans up to fair market value, the home buyer is often left to pay the difference. Some buyers renegotiate the price down with the seller, but if this is not possible, an appraisal contingency permits the buyer to exit the sale.
This article is written to provide readers with information on real estate topics. Do not read it as legal advice for your situation.