Many people buying homes don’t obtain adequate support. They are about to embark on one of the biggest transactions of their lives, and yet they may try to handle that process on their own or with the assistance of a real estate agent with minimal formal education.
Agents may rush people through the offer process and may consistently use the exact same documents for every client. The problem with this approach is that every buyer has unique needs, and every property creates unique challenges for aspiring buyers.
Many people hoping to become owners hire real estate attorneys to assist them during the transaction. One of the most important services an attorney provides is the creation of custom closing documents. An attorney can draft offer paperwork that includes important contingencies.
Why are contingencies so valuable for those attempting to purchase real estate?
Closings can fall apart at the last minute
People typically make offers on real property after a single walkthrough or viewing. They may be so excited about the updated kitchen or location of the property that they don’t inspect it as closely as they should.
Issues might then arise later during the inspection or appraisal process. Perhaps there are latent property defects that an inspector locates. Those issues with the property could cost tens of thousands of dollars to address. Without contingencies in the initial offer, buyers have to choose between risking their earnest money and going through with an unfavorable transaction.
Earnest money is essentially a deposit to signify a buyer’s sincerity about acquiring the property. If they cancel the closing without appropriate justification, the seller could seek to keep some or all of their earnest money to offset the costs they incurred because of the failed transaction.
Contingencies are essentially clauses in the offer and final purchase agreement that give the buyer legal justifications for canceling the closing. Common contingencies allow buyers to protect their earnest money if there are issues discovered during the inspection, a low value returned during the appraisal process or problems with obtaining a mortgage.
Real estate attorneys can help buyers honestly evaluate their circumstances and the property to determine what contingencies are necessary for their protection. While real estate agents may use basic, boilerplate contingencies, custom documents almost always offer better protection for those embarking on a major transaction.
Understanding why contingencies are important when seeking to acquire residential real estate can help buyers minimize what they risk when making an offer. Those with custom documents have fewer reasons to worry about overextending themselves or investing in the wrong property.