The process of buying real estate in Breckenridge, Colorado is filled with both anticipation and uncertainty. For better or worse, that’s the reality of making such a major purchase. In addition, when you buy a new home, you’re committing yourself to a certain property for an extended period of time. That can also increase the stress involved.
However, a good way to ease some of your anxiety is to include contingency clauses in your contract. Contingencies detail the conditions that must be met before you close on the sale.
In this blog, I’d like to discuss how contingencies work so that you can use them to your advantage as a buyer. Furthermore, I want to make sure you understand that sellers can also turn to contingencies to protect their interests as well. My hope is to help you prepare for–and be aware of–the contingencies that may exist in your agreement.
The Mortgage Contingency
Unless you are able to pay for a home without taking out a loan, you’ll need to secure a mortgage through a lender. Therefore, it makes perfect sense to include a mortgage contingency in your contract with the seller.
This contingency lists the type of mortgage you plan to obtain. Traditionally, you can choose from a conventional, Veterans Affairs or Federal Housing Administration mortgage for your loan. Within your contract, the contingency states the approximate interest rate you want and the date you expect to be approved. If you cannot meet these terms, you may be able to get out of the sales contract and have your earnest money returned to you.
The thing every buyer needs to keep in mind, though, is that the mortgage contingency can also help the homeowner. If the buyer fails to inform the seller by an agreed upon date that they can’t obtain a loan, for example, the buyer could be legally forced to purchase the home anyway. This means that even if you haven’t found financing, you might be obligated to buy the property. In some cases, depending on the contract, the seller may be allowed to find a mortgage for the buyer.
Therefore, the mortgage contingency isn’t just designed to give the buyer a way to end the contract. The seller can also use this clause to ensure fairness in the deal.
Other Important Contingencies
Another important contingency you need to know focuses on the appraisal. There are a couple of appraisal contingencies that are essential to understand. The first one states that if the buyer are not able to get an appraisal that is at least as high as the homeowner’s asking price, you can walk away from the sale.
A second version allows the buyer to ask the seller for a lower purchase price, if the appraisal is not as high as the figure you originally negotiated in the contract. If the seller won’t budge on the price, you are free to back out.
Lastly, an inspection contingency can offer the buyer a way to end the contract. If the home inspection uncovers any critical problems that cannot be resolved between both parties, you can choose throw out the agreement.
Real estate purchases are also often contingent upon the buyer selling their existing residence. Most homeowners can’t afford two mortgages so this is common, and a good idea for most buyers.
Whenever you buy real estate in Breckenridge (or anywhere else for that matter) it’s absolutely crucial that you understand the terms of the sales contract. If you aren’t clear on the contingencies, you could miss significant deadlines and possibly wind up scrambling later on.
As your Realtor, I’m available to answer any questions about the contingencies in your real estate purchase. My job is to represent your best interests and I’m here to help you through the process from start to finish.
If you’re ready to buy a home in Breckenridge or throughout Summit County, I can put together some properties that might suit your tastes. Feel free to start your search by looking through the updated listings on my website and when you’re ready to discuss your options or prepare for showings, contact me at any time via email ([email protected]) or on my office line. I look forward to working with you!