Contingency or No Contingency? That is The Question

When the time comes for the Buyer to submit an attractive offer with enough safeguards, you may need to determine which contingencies make sense to waive versus ones to think about creatively without throwing the dog out with the bath water.

1. Mortgage – This contingency is rarely waived unless the Buyer is purchasing the property with cash. A mortgage contingency date about a week prior to the closing date or later is the norm to give the Lender sufficient loan processing time. PROTECT THIS DATE. Request extensions from the Seller to avoid the risk of losing the deposits!

2. Appraisal – This contingency may be considered as folded into the mortgage contingency, especially if this is an FHA or VA loan. If it is not an FHA or VA loan, it is probably safest to explicitly state in the offer “subject to the property appraising at or above asking” to ensure everyone is on the same page and there is no denying that on an on-point appraisal is needed.

Sellers tend to avoid appraisal contingencies on offers and may even ask the Buyers to come up with the difference.

Agents exhibit a lot of creativity to overcome low appraisals. Buyers may request Seller’s closing cost credits to reduce the Buyer’s closing costs. Agents have been known to reduce their commissions to get their clients to the closing table. A very noble gesture indeed, but not highly recommended.

Everyone works hard to earn their keep! Addressing the possibility of an under-appraised property from the beginning may help avoid a lot of tension down the line.

3. Inspection – This contingency is waived frequently and IMO one of the riskiest waivers. Why you ask? Open houses are marketing tools for Sellers to sell their homes. Although the house is staged with color-coordinated drapes on chic signature pieces aesthetically located in the perfect nook, there is more than meets the eye!

Hiring a licensed inspector to look beyond the home’s pleasing exterior/interior is a key investment. An inspector provides a plethora of information for the Buyer to understand the property’s history with roofing, flooding, HVAC, pests, flooring, electrical and HVAC systems to name a few. I always tell my clients, “You need to go into home-buying with your eyes opened!”

Solely Informational Inspections give the Buyer an opportunity to examine the house with an inspector to understand the property’s needs while giving the Seller ease that the Buyer will not walk away from the deal based on inspectional findings.

Bringing a contractor to the open houses or a friend with an eye for scoping the soundness of a home is another idea. Then waiving the inspection makes more sense and your agent has more fodder to negotiate with the Seller’s agent!

This is not an exhaustive contingency list but you can get started on structuring your offer!

“To thine own self be true” [1] as you navigate your next purchase. Happy House Buying!

[1] Act 1 Scene 3 of Hamlet by William Shakespeare

Deborah A. Bondzie is an Attorney at Law with offices in Canton. You can reach her by email at dbondzie@bondzielaw.com or by phone at 617-483-3501.