Contingencies in Agreement

Put every contingency in your offer to buy home

By CANDY McCAMPBELL
For The Tennessean
Sunday, 04/02/06

A house is one of the biggest investments you'll likely ever make, so your purchase offer needs to cover all the bases: the right price, any contingencies needed and date of possession.

Most real estate agents use a standard contract that includes all the basics, such as the price, property description, closing and occupancy dates, title insurance, termite inspection, home warranty, who pays which costs, a default provision and payment of commissions.

It also should include three important contingencies: one for obtaining financing, one for a successful home inspection and a third for selling your existing home. If not, you could find yourself committed to buying a house without a way to pay for it. Or buying a house with costly problems. Or buying a house while you still own your existing home.

"Unless you have all the cash in your pocket, you need to make sure you have a contingency of a loan you can afford," says real estate attorney Alan Mazer, partner in Saturn and Mazer Title Services.

"I even suggest making it contingent on getting a loan at such-and-such an interest rate," he says. That way, a spike in interest rates won't throw your budget out of whack.

The more details you can stipulate in the offer, the better, says Lindy Gaughan, co-owner of Re/Max Choice Properties in Hendersonville.

"It's safer for the buyer if something should change," she says.

You can also make the offer contingent on:

Appraisal. You want the house to appraise for the sales price or higher.

Home inspection. "Every buyer needs a home inspection to see what they're actually buying," says Jim Terrell, real estate agent with The Pilkerton Co. If problems show up, buyers could void the contract, have the owner fix the problems or get credit on the purchase price to make the repairs, he says.

Sale of your current home. If you have a contract on your home and your buyer is approved for a loan, attach that to the offer, Gaughan says. If you don't have a contract, you may reach agreement on everything else in your offer but the seller could continue to try to market the house, giving you first right of refusal if another offer comes in.

A walkthrough the day before closing. "You want to make sure the house is in the same condition it was in when you saw it," Terrell says.

Possession. It's best to take possession of the property (including an exchange of all keys) at closing, but it's not always possible, Terrell says. If the seller stays later or the buyer moves in early, sign a lease so you know who is responsible for things such as taxes, repairs and the condition of the house, he and Mazer say.

What is there stays there. "Don't presume that if something looks like part of the house, it's going to stay," Mazer says. "If your heart is set on some feature remaining, put it in the offer." This could include anything from the washer/dryer to a chandelier or ceiling fan.

A septic inspection. Houses in many suburban areas have septic tanks instead of sewers, Gaughan says.

TERRELL GAUGHAN MAZER - The Tennessean