It is exciting to find a home that you want to purchase. You may walk through the home and admire the floor plan, the architecture, or the style of the home and you may begin to picture yourself living in the space. You may decide that this is the house that you want to purchase. If so, then you will need to make a formal offer to purchase to the current owners of the property.
In your excitement, it is important to remember to protect yourself in the home buying experience. While you want to present a strong and reasonable offer, you also want to provide some contingencies in your formal offer to purchase document that will allow you to back out of the sale without penalty under specific circumstances. Some of the most common offer to purchase contingencies include:
- A Low Appraisal: there are a lot of emotions involved in buying a house but there are also important financial considerations. If the house appraisal comes in for significantly less than your purchase price then you might not wish to purchase the home.
- A Bad Home Inspection: There are many things that can go wrong in a home inspection and almost every inspection report will recommend some kind of improvement that should be made on the property. That said, if the home inspection comes back with many problems or a single expensive problem, then you might wish to cancel your offer to purchase unless the seller agrees to remedy the problem.
- Being Denied a Mortgage: If your mortgage is not approved then you will not have the funds available to purchase the property and you will likely want to back out of the sale.
- Discovery of Title Problems: Your title search may reveal that the property is subject to numerous easements or has an encumbrance that you do not want. It could also reveal an uncertain chain of title. In either case you might wish to find another home to buy.
- Being Unable to Sell Your Existing Home: Some buyers make their purchase of a home contingent on the sale of their existing home so that they have the funds to purchase the new home and so that they do not carry two mortgages at the same time. If your existing home does not sell by a certain date then you might wish to back out of the sale of a new home.
When you’ve found the home that you would like to purchase, it is important that you make your offer to purchase with the contingencies described above so that you are truly getting the home of your dreams. In order to take advantage of these contingencies they must be explicitly included in your offer to purchase that is accepted by the seller. You can find and complete a standard offer to purchase document that is appropriate for your situation or you can consult a real estate attorney for further guidance.
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