Purchasing a home may be the biggest investment you ever make, so it is critical that you do your due diligence and take steps to protect your own interests along the way. Before signing any contracts, you should review and consider any contingencies or disclosures to avoid unpleasant surprises down the line.
What are contingencies and disclosures, and how can they protect you as a real estate buyer?
A contingency is a contract clause that enables you to walk away from a particular home purchase if certain specific conditions do not exist. A mortgage contingency, for example, dictates that your purchase of a home depends on whether you obtain financing for it.
An inspection contingency protects you in the event that a home inspection reveals something seriously amiss. An inspection is always a good idea before buying a house, because if you fail to have one and the home has a major defect, you may have little recourse. A contingency can allow you to request that the owner conduct repairs before the sale or meet other requirements.
Disclosures are things the person selling you the home must tell you about the property. Sellers have legal obligations to disclose certain information about environmental hazards, such as flood hazards. They must also tell you whether the home has known defects or has been the subject of any homeowner’s association issues, among other disclosures.
How contingencies and disclosures protect you
Contingencies give you a chance to make an offer on a home on a conditional basis. That way, if you fail to find financing or if the home is not up to standards, you are not simply out of luck. Disclosures give you a chance to get the full backstory on a prospective home before purchasing it. That way, you have an opportunity to make an educated decision about whether to move forward with the purchase.