You need to be aware of contingency clauses when buying a home in Albuquerque. These clauses bind the contract by requiring certain requirements to be met prior to closing. If they aren’t met, then the contract can be terminated.
Some people describe these as if-then scenarios. For instance, if you sell your home you’ll buy someone else’s.
The buying process begins with a purchase offer you make to a seller. Your contingencies may be included in the purchase contract once your offer is accepted.
Among the most common contingencies are the following.
Selling Your Current Home
The chain of sale clause is the most common contingency where your offer might be contingent on the sale of your current home.
If your home's not sold after a certain period of time, usually 30 to 60 days, your contract will end.
As long as you are buying your home during a down market, this strategy might work for you. However, if you're trying to purchase a home during a hot or competitive market, such as is occurring now, this might not be as feasible.
Appraisals
The appraisal contingency is a way for you as a buyer to be sure the property appraises for a minimum amount. If the property does not appraise for that amount, you can terminate the contract. The earnest money can be returned in most cases.
Inspections
There’s always a good reason for having a professional inspector examine a property before you move in. An appraisal, on the other hand, is required by lenders. An appraisal doesn’t look at the physical condition of a home as much as specific factors that affect its value.
An inspector evaluates structural and mechanical elements of a home and identifies anything that needs replacement or perhaps repair. These can be used in your negotiation.
There might be a clause in the contract that requires repairs be done by the seller if they are found, or you might renegotiate based on what an inspector finds.
It’s possible that you will agree not to have an inspection if you’re in a hot market.
Financing
Financing contingencies, or mortgage contingencies, can give you the time you need to get the financing you need for your home purchase. If financing cannot be obtained, then there is the possibility that you can end the contract without forfeiting your earnest money.
You may have a financial contingency in a contract, where you have a period of time to obtain financing. Then, you may have a certain amount of time to terminate or extend your contract. The contingency is automatically waived if the contingency is not met, and you have to buy the property even without financing.
It’s important to understand that contingencies can be essential when buying a home. However, you need to use them wisely because overusing them may cause your offer to be rejected. With multiple offers flying around, sellers tend to prefer buyers with less contingencies. Even if you’re not able to beat a competitor's offer, you can at least take out contingencies and make yourself a more attractive buyer.