If you’re like many people, you know that buying a home is a huge deal – and that you’ll have to sign a contract to facilitate the deal. Part of that contract will be dedicated to contingencies; those are conditions that either you or the seller must meet in order for the transaction to go through. You don’t have to sign a contract with contingencies if you don’t want to, but generally, they’re there to ensure that you come out on top. With that said, there are five contingencies you should never waive when you buy a home; doing so is at your own risk and could end up costing you in the long run.
Though it’s your decision whether to waive contingencies, here are five that we don’t typically recommend waiving (although every case is different):
- Home inspection contingency
- Appraisal contingency
- Financing contingency
- Mold remediation
- Water and septic
Here’s a closer look at each.
Contingency #1 to Never Waive: Home Inspection
When you buy a home, part of your due diligence is to have it inspected by a professional before you sign the dotted line that makes it yours. Your home inspector will examine the property for issues that could affect your enjoyment of the home, and if they find anything wrong with the house, they’ll let you know. You can use that information to negotiate with the seller for repairs or a lower price.
If you waive the home inspection contingency, you don’t have the right to hire a home inspector and use the findings to negotiate – or to back out of the deal, either. You’re stuck buying the home, even if the roof is caving in or something else is wrong with it.
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Contingency #2 to Never Waive: Appraisal
When you buy a home using a mortgage loan, your lender will send an appraiser to the property to determine whether it’s worth what you want to pay for it. If the appraiser says it’s worth the same amount (or more) than what you want to pay, you’re good to go – your lender will most likely approve you for the loan (as long as you meet all the lender’s other criteria) and you can buy the house.
However, if the appraisal comes back low (meaning that the home is worth less than what you want to pay), your lender will refuse to lend you the full amount you’re asking for. With an appraisal contingency, you can back out of the deal if this happens – but if you waive the appraisal contingency, you’re on the hook for coming up with the additional sum of money that the bank won’t let you borrow.
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Contingency #3 to Never Waive: Financing
Things go wrong from time to time – and that includes mortgage loans. If something comes up and you can’t secure financing to buy a home, you can use the financing contingency to get out of the deal. However, if you waived your financing contingency and you can’t come up with the cash to buy, you’re still obligated to do so – and that can put you in a really sticky situation. Don’t waive your financing contingency!
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Contingency #4 to Never Waive: Mold Remediation
Mold can grow in the most seemingly unlikely places, and that means if your home inspection uncovers it, you need the seller to agree to pay to handle it. Typically, this is accomplished by a mold remediation contingency in your real estate purchase contract.
If you waive this contingency, you may have to buy a moldy house – and unfortunately, mold is stubborn and requires professional attention. It’s also surprisingly expensive to get rid of.
Related: 3 things to fix before your buyer hires a home inspector
Contingency #5 to Never Waive: Water and Septic
Septic systems can be incredibly expensive to fix, so if your inspection turns up a problem with the home’s water or septic, you need the seller to step in and pay for repairs or upgrades. This, like mold, is usually addressed with a contingency in the contract.
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