Ever seen the movie “The Money Pit”? Released in 1986 and starring Tom Hanks, the movie is a slapstick look at life in a fixer-upper. As the walls literally come tumbling down around him and emotions unravel, Hanks’ character surely wishes that he would have had a good Realtor on his side who could have advised him to hire a home inspector before purchasing.
When you are preparing to make an offer on a property, it is essential that you carefully consider your contract contingency options. A contingency is a condition of an offer that must be satisfied before a buyer closes on a property. Common contract contingencies include but are not limited to: Loan approval, home, pest, radon and mold inspections and final walk-throughs.
The loan contingency is kind of a no-brainer.
If your loan application is denied, you don’t have the money so you can’t buy the house. Since you’re an organized home buyer though, you got a preapproval letter before house hunting so you probably won’t have any issue. Your Realtor can detail your loan type in the offer as a financing contingency. You can stipulate what interest rate your loan must stay below for you to be obligated to purchase. Say you outline that it must be at 5% or lower. If all you-know-what breaks loose and rates shoot up to 23% overnight (eek!), you can walk away from your contract.
Getting back to Mr. Hanks and his character’s insight into the importance of inspection contingencies, here’s a quick breakdown of what these are and how they work. To put it plainly, your inspection contingencies are put in place so you can make sure you know what you’re buying before you take ownership of the property. Be sure to do your due diligence.
A home inspection occurs when you engage a professional, licensed home inspector to check out a property for you. Your home inspector will be at the property for several hours and is there to explore every nook & cranny. Buyers typically show up at the end of this inspection for an on-site overview of findings. The inspector will then email the buyer a detailed written report. Based upon this report, your Realtor will assist you with the necessary paperwork to request repairs, request a price reduction, terminate the contract or accept the findings and proceed as-is.
Pest, radon, and mold inspections work much the same way. A licensed professional is engaged, and you receive a written report of findings. You can, again, work with your Realtor to proceed as needed based upon these findings.
You’ve negotiated, you’ve inspected, and you’re ready to move in.
Just before your closing appointment, you meet your Realtor at the property to do a final walk-through. You make sure everything looks as it should, then you head off to closing to sign on the dotted line and celebrate becoming the proud owner of your new – and carefully inspected – home. When you get settled, you can sit back, watch the movie, and smile when their bathtub crashes through the floor, knowing you avoided a similar fate by inspecting your property before you bought it.