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5 Common Home Contingencies When House Hunting

February 24, 2022 | By Reef Merhi

Table Of Contents

When buying a new home, it is not uncommon to deal with certain contingencies before completing the sale. You might be excited to find your dream home and get into it, but it's not enough to find the property and agree to buy it. Certain conditions must be met before closing the sale. 

Contingencies allow buyers and sellers an opportunity to thoroughly evaluate the home, finances, and more. Buyers need to be thorough when obtaining a mortgage and receiving clear title to the property. The sale is also contingent upon the seller providing a property free of major defects and disclosing known problems.

One of the best mortgage companies Texas property owners trust can guide first-time buyers through the purchase process. Here are five common contingencies to understand before buying a home. 

1. The Home Inspection

When it’s time to make an offer on a house, it’s common to include a home inspection contingency. This states that you are willing to buy the property if a home inspection does not reveal anything that the seller did not disclose and does not identify problems that are bigger than you’re willing to repair. Buyers hire a home inspector, schedule the inspection, and explain how issues revealed in the inspection impact the sale of the property.

While finding a problem can be disappointing, specific issues found in an inspection are common and not necessarily worthy of canceling a sale. Inspections help identify unknown or major property issues, such as foundation problems that can be costly to repair. In some cases, major structural flaws allow a homebuyer to cancel the sale contract without penalty if the seller does not address them. At other times, a buyer and seller may agree to reduce the sale price to cover the cost of resolving issues found during the inspection. 

cropped shot of realtor with sold sign shaking hand of young woman with daughter in front of new house

2. Financing

A buyer can also include a finance contingency when making an offer. This contingency states the sale depends on obtaining necessary financing from a lender, whether buyers choose conventional loans or USDA loans. If the buyer can’t get the funds they need, the contingency allows them to back out of the sale without penalty. 

This contingency may include a finite period of time in which buyers must exercise the contingency or waive it if it is not used. This indicates to the seller that you’ll act quickly to obtain financing and notify them by a specific date if it falls through. Even the best mortgage lenders may decline to provide funding if they discover problems with your credit score or ability to pay the mortgage or if there are concerns about property liens or other issues. Many first-time buyers look to FHA loans in Texas to help with financing!

3. The Appraisal

An appraisal contingency is common when financing a new home with a mortgage. A home loan company can require an appraisal before approving the mortgage to ensure that the sale price aligns with the home's appraised value. Buyers can include an appraisal contingency that allows them to cancel the sale contract if the appraised value is less than the sale price. This protects buyers if there is concern that the appraised value is significantly lower than the sale price.

If you find a home you love, but the appraisal falls short of expectations, you might have the option to cover the difference between the appraised value and the sale price with cash at closing. However, in some real estate markets, sellers may not accept an offer from a buyer with an appraisal contingency. 

4. The Sale of Another Property

If you already own a home, you could face a contingency that requires you to sell that home before closing on a new house. This is one of the least desirable contingencies for sellers who remain in limbo on a new home while waiting for their current home to sell. While the timing isn't always ideal, property sale contingencies help protect sellers from buyers who can’t sell a house and back out of a deal. However, for first-time buyers, this isn’t often an issue! 

Realtor holds home sale contingency memo sign

5. Title Contingencies

Most offers to buy a home include a title contingency that allows the investor to cancel the sale if a title company discovers problems with the property's record of ownership. These problems can include a lien pending on the property that has not been resolved or judgments attached to the property from a civil action or unpaid taxes. The liens and judgments must be satisfied to clear the title for the new owner. Buyers can back out of the sale without penalty if these issues are not resolved.

Choose the Best Texas Mortgage Lenders For Your First Home Purchase!

It’s not uncommon to include contingencies in real estate purchase agreements. They can protect buyers from costly problems when reviewing and negotiating the purchase of a new home. If you’re ready to buy your first home and talk about handling contingencies, reach out to Texas United Mortgage Company! As one of the most trusted mortgage companies in Houston, we help first-time buyers navigate the journey to find and finance a home with ideal mortgage loan options.

Learn more about buying your first home! Download our free “First-time Home Buyers Guide.”


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