Buying a Home: Protect Yourself From Contingent Liabilities And Disclosures

Potential liabilities and disclosures protect home buyers and sellers. They must be resolved before ownership of a property can change ownership. Buying a home is a compromise. But it’s more than just giving money and taking the keys. The contractual process includes a number of contingent liabilities and disclosures. Let’s sum up.

Contingent liabilities are “withdrawal” clauses in a contract that allow you to stop buying a house if certain conditions are not met.

Disclosure is the responsibility of the seller and reveals each individual hardware defect.

These contractual provisions serve both sides of a real estate transaction and protect you as a buyer and also as a seller. All must be resolved one way or another before the end of the sale.

Make a conditional offer for a house

Consider a contingency as “if-then”. For example: “If I can sell my current house, I will buy yours.” It is likely that various standard contingent liabilities are already included in the purchase contract, e.g. B. that the sale is subject to a property valuation. This is an important condition because the buyer can find the lender to make up the difference if the price of a property is lower than the value of the offer. You certainly want this possibility to be part of a binding offer.

Here are some other common contingent liabilities.

Mortgage contingency

Perhaps the most common condition is a contract that depends on whether or not the buyer receives financing. A mortgage clause will not penalize you if you do not qualify for a mortgage and the seller has not owned your property to an unqualified buyer for an extended period of time.

A mortgage is also required if you have already been approved for a mortgage. Once a home is under contract, your loan must go through a final underwriting phase.

(While this is not a guarantee of final approval, it is still important to get pre-approved before looking for a home. Learn more about how to get pre-approved for your mortgage.)

Emergency inspection

You should always have a qualified home inspector who will carefully examine your potential new home. Remember that the appraisal is a home appraisal for the lender; does not require a detailed examination of the physical condition of the property. A building inspector performs an in-depth analysis of the structure and mechanical systems and, above all, identifies the parts to be repaired or replaced. You can then negotiate to resolve these issues through a home inspection.

Your contract may require repairs if problems are identified. However, this can cause delays in closure during the planning and approval of repairs. In hot markets, buyers often pay a pre-inspection report before bidding or do without an inspection altogether. A pre-inspection report gives the potential buyer an idea of ​​the main issues that may be lurking, rather than a full inspection. Sales contracts can also be concluded with the “right of withdrawal”. This means that you do not need the repairs suggested in the home inspection report, but you can cancel the sale without penalty.

Home sales for unforeseen events

In these circumstances, your offer will depend on the completion of the sale of your current home. A sales chain clause is usually based on a period of time, usually 30 to 60 days, after which your contract is lost. In a seller’s market, including this possibility, your offer will be seriously disadvantaged.

Other contingent liabilities

Other standard contingent liabilities may include such things as termite certification and setting a reasonable time to close the sale. However, there may be additional terms that you want to include in an agreement.

While protecting your own interests is important, the seller is generally less enthusiastic as your offer contains contingencies. You have a better chance of combining your offer with “if-then” in the buyer’s market.


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