You’ve found your dream home, and your offer is accepted. You’re so excited you can hardly wait to move it. Of course, there are a few steps to take before that day comes.
Unfortunately, some of those steps might reveal problems with the property that may cause you to change your mind about the purchase. Can you adjust your buyer contract or cancel a sale after the contract has been signed?
Sometimes you can. Usually, these changes are related to contingencies that exist within the sales contract. If those special conditions aren’t met, then the buyer has a right to change the sale price or walk away from the purchase entirely.
Here’s what you need to know to protect yourself and your purchase.
It’s always a good idea to get a home inspection before you finalize your purchase of a property. The sales contract will often give you a specific amount of time to complete the inspection.
As long as, you get the home inspected within that time frame, you are then able to make a decision about the findings. Often, the issues are minor or easily fixable and you approve the inspection. That means the sale continues to move forward.
However, sometimes there are significant concerns. If you decide the home inspection has revealed problems beyond what you’re comfortable with, you can ask the seller to fix the problem before the closing. Or, you can ask for a concession in price so that you can afford to fix the issue once you move in.
If the seller won’t negotiate with you, or the problem is simply too serious to address in this way, you can disapprove the inspection and back out of the home sale. At that time, your earnest money will be returned, and you’ll start your house hunt again.
Items like structural defects, significant pest infestation, mold, and more can be a deal-breaker when you’re buying a home. Be sure you look for these things with a high-quality inspection before you finalize your purchase.
Another common concern that buyers have is that the home isn’t worth as much as the seller claims it is. If the appraisal isn’t high enough, the bank won’t approve the full amount of your mortgage loan even if your finances are perfect.
For example, if a home sale price is $450,000, but the home appraises for $350,000, the bank is likely to only loan you $350,000. If you want to buy the property for $450,000, you have to supply the other $100,000 yourself. That’s generally not possible for a home buyer, so the appraisal contingency protects you.
The appraisal contingency says that if the home appraises below the sale price, the seller has the opportunity to lower the price to the appraised value. Or, the buyer may be able to move forward if they have the extra cash. But if those options aren’t available, the contract is void and you aren’t bound to the purchase.
Another way to protect yourself from unexpected problems with the home you’re buying is by requiring the seller to pay for one year of a home warranty. That way, if something happens or breaks after you move in, you can get it repaired and pay less than you would have otherwise.
This can be an important amendment to your contract because right after moving, most people don’t have a significant amount of money available for major repairs. If the HVAC or a major appliance needs repair or replacement, a home warranty can help. The warranty company can also refer you to reputable service providers so that you don’t have to spend time on that yourself.
Make sure you understand the full terms and conditions of the warranty before you agree to it. Some warranties only cover specific parts of the home, and others have a variety of exclusions that may make it difficult to get coverage.
We’ve been in a very competitive real estate market recently, but that doesn’t mean you should throw caution to the wind. Instead, use these contingencies to protect yourself so that you don’t end up with a home that’s a headache instead of dream come true!