When making a significant investment like a real estate purchase, it's important that you have the protection you need. Appraisal contingencies can be useful for protecting buyers. Read on for more information about how an appraisal contingency can help homebuyers.
How Do Appraisal Contingencies Work?
An
appraisal contingency is a clause that can be inserted into a home buyer's purchase offer to protect their prospective investment in the property. You can think of a contingency as a requirement that must be met before the offer can move forward, providing a safety net to the buyer.
In the case of an appraisal contingency, the clause states that the homebuyer will be able to back out of the deal if the home in question is appraised for less than the price stipulated in the contract. This type of contingency is commonly used by buyers using financing to purchase their home, especially in markets where home values are particularly volatile.
When Is an Appraisal Contingency Beneficial?
An appraisal contingency is worth considering if you desire
extra protection when making your purchase. If you intend to take out a lengthy financing commitment as a means to pay for the property, it is likely worth protecting your finances with a contingency clause. Having a professional appraiser like
North Sound Valuation assess the property will help you feel confident you're being given a fair price.
When Should You Waive an Appraisal Contingency?
Waiving an appraisal contingency can make your offer more attractive to sellers because it signals that you don't intend to have the property appraised prior to making your purchase. If you are buying the property in cash or have enough cash on hand to make a down payment of 20% to 25% of the purchase price, you may wish to consider this option.
Other Types of Contingency Clauses
Financing Contingency
Also known as a mortgage contingency or a loan contingency, a financing contingency allows a buyer to back out of a deal if they aren't able to secure favorable financing terms. This means the buyer isn't locked into a purchase agreement until they receive final approval from a mortgage company.
Title Contingency
In order to fulfill a title contingency, the title work for the property must be verified as completely clean. This means the seller can claim a clear title of the property, without any liens or other complications involved.
Home Sale Contingency
A home sale contingency is a useful clause for anyone selling their home to move into a new one. This type of clause stipulates that the purchase agreement won't go through until the buyer has sold another property of theirs.
Inspection Contingency
Inspection contingencies add a requirement that an inspection must take place prior to the sale being finalized. The inspection must return with only defects that the buyer finds acceptable before the deal can go through.
Making the right decisions in your real estate purchase requires several different financial considerations. An expert home appraiser can help. Accurate appraisals can make all the difference when it comes to making sure you get a favorable deal when purchasing property, giving you a deal you can feel confident in.
Rebecca
