As we’ve mentioned before, contingencies are used in real estate to protect both the buyer and seller. These clauses act as “loopholes” for either party to back out of the sale if certain conditions aren’t met. Most often the contingencies protect the buyer. But, what happens if the market is really tough for buyers. Should buyers ever consider waving contingencies in order to compete in a seller’s market?
The short answer is No. The longer answer is maybe, but only under certain conditions. Since the contingencies are generally in favor of the buyer, waving them risks losing the earnest money deposit. Still, buyers desiring to look most attractive to sellers may waive one of these:
- Home inspection – Naturally, waiving this contingency would make a buyer very appealing to a seller. But if a buyer chooses to waive the inspection, they could be in for a very serious surprise about issues with the home. This could literally cost a buyer thousands more than they expect in repairs. Virtually no one recommends waiving this contingency. IF you are determined to do so, be sure to at least have a pre-inspection before making your offer. It may not be as thorough, but should give some assurance of MAJOR issues.
- Appraisal – Lenders will only finance based on the home appraisal. If a seller wants to waive this contingency, he or she is then responsible for making up the difference with their own cash. Often buyers do not have the ability to do this or don’t want to run the risk of buying a home already overpriced for its re-sale value. In some situations though, the home is in a highly-sought area and the buyer is willing to waive the contingency and pay the difference just to “get in.”
- Financing – At first glance, buyers may think this contingency is worth waving. If a buyer feels confident in their ability to secure financing for the home, they may consider waiving this clause. The bottom line though is that the buyer would be responsible for buying the home even in a worst case scenario- job loss, no loans available, only very high interest loan options, etc. Of course, for cash buyers this contingency is often waived.
The best way to handle consider options about waving contingencies is to work with an experienced REALTOR. These decisions have enormous financial impacts and buyers should work closely with an expert before making them.
If you would like to discuss buying a house in Nashville and the possible contingencies involved in that process, call DeSelms Real Estate today at 615.550.5565!