Closing - Initial Steps
The Home Inspection
It is essential to conduct a home inspection before buying a house, and your contract should be contingent on the home “passing inspection.” In other words, if the inspection results do not meet your standards, you can get out of the deal. In some cases, the property may be listed “as is” in which case you will not be permitted to cancel the deal because of inspection issues and the seller may not even permit an inspection at all. Make sure you use a home inspector that is licensed, bonded and insured and read the report thoroughly. It might make sense to have a contractor give you an estimate for any necessary or desired repairs ahead of time, so you can understand what your financial commitments might be down the road.
What is a Contingency Clause?
A contingency clause can refer to any of several clauses in the contract that give you the right to cancel the contract upon the occurrence or non-occurrence of specific things. For example, passing the home inspection or having your attorney approve the contract. Another common contingency is that you will be able to obtain a mortgage on specified terms. While you likely already know your mortgage eligibility before making an offer on a home, most contracts still give you the opportunity to find one under specific terms; if a bank does not ultimately approve you, or does not provide satisfactory terms, you may be able to cancel the contract. Make sure you understand what contingencies you have and the deadlines for complying with them.