First-time homebuyers are often confused when hearing about contingent offers on a home. Is it necessary and do they really need it? When the market is hot, most buyers rush their decision as they know that competition is fierce. But, in a buyer’s market, like the one we have now, contingency offers are standard practice. It involves a set of conditions requested by the buyer to be met before finalizing the transaction. Most homebuyers come up with a list of requirements the sellers need to fulfill before they remove their conditions. They are pretty common in Calgary SE as well, so if you are looking for a home there, this is what you need to know about homebuyer contingencies.
Appraisal
Asking prices tend to be higher than the market value of the home. This means you should make your offer contingent on the appraised value. If it turns out to be much lower than asking, you can walk away from the deal. In fact, maybe you won’t even have the means to buy at asking, as lenders’ loans are usually based on the appraised amount (fair market value) instead of the asking price. You’d have to come up with the difference on your own as your loan wouldn’t cut it. Your Realtor should give you a good evaluation before you write an offer as to the statistical value of the home.
Pre-Approval Contingency
Sellers usually need proof that you’re a serious buyer, so when making an offer, you should also show the mortgage pre-approval to the seller, but it’s still not a 100% guarantee that you’ll get the loan after all. Make a contingency offer until you get the final green light from the lender. You will add a financial condition.
Timelines
A contingency offer often involves different timelines that buyers and sellers agree on. Buyers usually have to check with their agent, lawyer, lender, inspector, etc. that everything is in order before removing the condition such as a home inspection. After all, you need to be sure that the home is in good condition and that you are not investing into a money pit.
Offer contingent on selling the current home first
Sometimes, buyers look around for a new home before they decide to sell their current home. When they find one and are ready to put down an offer, they may ask sellers for some extra time to sell their existing home before they enter any transactions. If they fail to sell within the given timeline, the sellers can cancel the contract. In today’s buyers’ market, many sellers are reluctant to sign this.
Title
It’s not always clear who exactly owns the home. If you want to be sure that you’ll become the owner of the entire home or property without third party interference, you need to know if one or more persons own the home, for instance, if husband and wife are separated. This information will be requested in the purchase offer. If applicable, the Dower Rights need to be in proper legal order and both parties sign the purchase offer.
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