What Contingencies Should I Include in My Offer?

When you make an offer to buy a home, it's expected that you'll include some conditions in the offer. We can help you include just about any stipulation, but there are some common contingencies that just make sense. If you're not sure what to include, or how many contingencies you should put in your offer, these thoughts might be helpful for you. 

Financing Contingency

The mortgage or financing contingency is one of the most common contingencies in a real estate offer. It protects you from penalty if you are not able to follow through with the purchase because you cannot secure financing. If you are pre-approved for a mortgage, this contingency provides extra protection by allowing you to back out of the deal if the loan is not finalized due to changes in your financial situation or unforeseen issues with the lender.

This contingency is especially important for most buyers, as there are no guarantees until the loan is officially approved. However, in a competitive market, some buyers may choose to waive the financing contingency to make their offer more appealing to the seller.

While this can make your offer stand out, it’s a risky move that could leave you on the hook for the full purchase price if your financing falls through. If you choose to waive this contingency, you need to make sure you are absolutely certain of your ability to secure the necessary funds.

Inspection Contingency

An inspection contingency allows you to have the home you are preparing to buy inspected by a professional before finalizing the sale. This contingency is crucial, as it helps you uncover structural damage, plumbing or electrical problems, mold, pest infestations, or any other issues that impact the condition of the home. If significant issues are found, the contingency allows you to either negotiate repairs with the seller, request a price reduction, or back out of the deal entirely.

For most buyers, the inspection contingency is non-negotiable. Waiving it can leave you vulnerable to costly repairs and serious stress after the sale closes, and without recourse if the home has hidden problems. In a particularly competitive market, some buyers choose to waive the inspection contingency to make their offer more appealing to sellers. While this tactic can make your offer more competitive, it’s essential to consider the potential financial risks.

Appraisal Contingency

The appraisal contingency protects you if the home appraises for less than the purchase price. Lenders will only loan you the amount that the property is appraised for, so if the home appraises for less than the agreed-upon price, you end up with what we call an appraisal gap. In this case, you will need to either come up with the difference in cash or negotiate with the seller for a lower price. The appraisal contingency keeps your options open in case an appraisal gap happens.

Some buyers choose to waive the appraisal contingency to make their offer more attractive. This is especially common if you expected to end up in a bidding war in a market where homes are selling for above their asking price. However, waiving this contingency can be risky. If the appraisal comes in lower than expected, you could be forced to cover the difference out of pocket, and end up buying a home for more than it's worth.

For buyers who don’t have extra cash to make up for a low appraisal, keeping the appraisal contingency in place is critical for financial protection.

HOA Contingency

There are many homes in St. George that are located within communities that are managed by an HOA. In fact, many of the best neighborhoods in St. George have an HOA. 

If you’re purchasing a home in a community with a homeowners association (HOA), it’s a good idea to include an HOA contingency. This gives you time to review the association’s rules, regulations, and fees. If you find that the HOA rules are too restrictive or the fees are too high, you can use this contingency to back out of the deal.

HOA regulations can vary widely, and some buyers don't want to deal with strict rules about home improvements, parking, or landscaping. Including an HOA contingency allows you to make an informed decision about whether the community is the right fit for your lifestyle.

How many contingencies can I include in my offer?

The simple answer is that you can include as many as you want. However, expert advice might vary on this. Our own Erika Rogers explains, "Deciding how many contingencies to include in your offer should be heavily influenced by the professional perspective of an experienced local agent. We're able to look at the whole picture of your needs, financial position, and risk tolerance as well as the current market conditions to help you determine what you should include in the offer."

Ready to learn more about homes for sale in St. George? Contact us any time.