Working with a Contingency

It is common for a home to be under contingency.  But what does that mean?

A contingent offer is one where the San Diego seller and buyer have come to an agreement and the sale will go through if there are other factors met first.  Most contingencies will depend on inspections, financing, or an appraisal on the San Diego house. They are meant to help protect the buyer if any of these pieces do not go smoothly.  

Inspecting the San Diego Home

Arguably the most important contingency in terms of protecting the San Diego buyers is the inspection contingency.  This contingency should be waived with extreme caution. The San Diego home should be inspected before being purchased.  Otherwise, major problems with the home could be lurking and the buyer would never know.

A San Diego buyer does not have to walk away from a property that has issues uncovered during a home inspection.  However, having an inspection contingency will allow them to do so and keep their earnest money though. If they would like they may negotiate the price with the seller or ask the problem be fixed before the sale be completed.

Financing the Home

Financing contingencies can be waived if the homeowner is certain they can fund the purchase.  If they are paying cash they do not need to worry about getting a mortgage approved. This contingency is not going to be needed in this instance. But for a San Diego buyer who needs to get a mortgage, it can be important.

Smart San Diego buyers will talk with a bank before making an offer.  They will give the lender all of their financial information and obtain a pre-approval for a mortgage.  This pre-approval shows that the buyer can get a certain amount to purchase a home. A San Diego buyer going in without a pre-approval needs to have this contingency in place in case the bank will not offer them a loan.

Appraising the Home

The asking price of the San Diego home is not necessarily the market value of the home.  This fair-market value is used by lenders to determine how much they could sell a home for in the event they must foreclose on it.  It shows what the appraised value of the home is which is determined by a third party that is usually supplied by the lender.

Anytime a San Diego home comes back at a vastly different price than its asking price, there is a problem.  The owners are likely asking too much for the house to begin with and rarely should a buyer should pay extra on a home just to get one bought.  

Another problem some San Diego home buyers come across happens if they waive their right to the appraisal contingency.  Without this contingency in place, if the appraised value of the home comes back much lower than the offer price the home buyer must pay the difference out of pocket.  If they do not have the money, they are in for a whole new set of problems.

Contingencies are not something a San Diego home buyer should take lightly.  They need to be carefully planned and considered. While a sale may feel like a sure deal, there are many problems that can occur during the sale process.  Having these contingencies in place can save a San Diego buyer from suffering the sometimes severe consequences of these problems.