types of contingent offers

Real Estate Defined: Types of Contingent Offers

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Before we explore the various types of contingent offers, let’s clarify what a contingency is. A contingency, or contingent offer, means specific conditions must be met before the sale proceeds. Otherwise, the contract is void and the seller can consider other offers.

Home inspection contingency

A home inspection contingency helps protect the buyer if the home inspection uncovers certain issues, allowing the buyer to back out.

A home inspector will assess the home’s condition, looking at all aspects, including unnoticeable details and things buyers might not consider. If the inspection reveals major flaws in the home’s interior or exterior specified in the contract, the buyer can back out or request repairs or a lower purchase price.

Mortgage contingency

Giving the buyer a specific period to secure home financing is known as a mortgage contingency. Typically, this contingency is done early in the process, but you will want to ensure you have been pre-approved for a mortgage.

Appraisal contingency 

An appraisal contingency happens most often when you are taking out a mortgage. This is because lenders require an appraisal, which is a third-party assessment of what the home is worth.

Even if both buyer and seller agree on a sales price, your lender can’t offer you a mortgage for more than the home’s appraisal. But, hope for a sale isn’t lost. Buyers can put down a larger down payment if they have the money so they won’t need a loan for more than the house is worth, for example.

Title contingency

Next up on types of contingent offers is a title contingency. This means the buyer’s offer is contingent upon the home having a “clean title” free of liens or obstacles.

If there are any claims against the title, it can make a purchase risky for buyers. But luckily, a title search can reveal these issues before closing. However, even if concerns are addressed, title insurance protects against future claims.

Home sale contingency

One of the most common contingencies is a home sale contingency. This contingency means that the sale of the home you’re looking to buy will only go through if your current home sells first.

Although it is possible to move forward with buying a new house before your current home sells, a lender may be able to help you with a bridge loan or suggest another financial strategy. Or you can try to request a later closing date—this will rely on the seller’s agreement.

Summary

Now that you know more about the types of contingent offers and what to expect, connect with a trusted REALTOR to learn more. Check out our Lee County Association of REALTORS members to find a good fit.

For more news and information, continue reading our blogs.

a walk through the home buying process

A Walk Through the Home Buying Process

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Are you thinking about purchasing your first home? Or has it been a while since you’ve last sold or bought a home? Regardless of the answer, let’s take a walk through the home buying process to refresh your memory and remind you how to prepare for it.

Understand your finances.

In other words, check your financial health. Review your credit score, look at your expenses versus your income and calculate how much you can afford.

Create a budget.

When it comes to budgeting, remember to calculate the one-time and recurring costs. These include the down payment, closing costs, move-in expenses and property taxes, for example. Typically, a 20% down payment is the norm.

Get pre-approved for a mortgage.

Before you start looking at homes, it’s important to get pre-approved for a mortgage. This will give you a better understanding of how much you can afford to spend on a home and will show sellers that you are a serious buyer.

To get pre-approved, you’ll need to provide your financial information to a lender, who will then determine how much they are willing to lend you.

Find a Realtor.

A Realtor will be your guide through the home buying process, helping you find homes that meet your criteria, negotiating offers and navigating the closing process. Look for an agent who is experienced in the local market and has a track record of successful transactions.

Start house hunting.

Once you have your pre-approval and a Realtor, it’s time to start looking at homes. Make a list of your must-haves and nice-to-haves. Be open to exploring different neighborhoods and property types. Attend open houses, schedule private showings and don’t hesitate to ask your Realtor for their expert opinion.

Make an offer.

When you find a home that checks all the boxes, it’s time to make an offer. Your Realtor will help you draft a competitive offer that takes into account the current market conditions and the seller’s motivations.

Schedule a home inspection and appraisal.

As we continue our walk through the home buying process, it’s important to remember this critical step. A home inspection helps determine if the property has any structural, mechanical or other potential issues.

Depending on the report, potential buyers can request specific repairs from the seller or back out of the deal.

Prepare for the closing.

It’s official! As you get closer to closing day, your Realtor will help you become familiar with the standard closing documents beforehand. On or near closing day, plan on doing the final walk-through with your Realtor to ensure that everything’s as agreed upon.

Summary

With a walk through the home buying process fresh on your mind, do you have more questions for an experienced Realtor? Connect with your next local Realtor to have your questions answered and start your search for a home in Lee County. Keep reading our blogs for more real estate news and guidance.

expansion of the AHFA's mortgage savings program

In the News: Expansion of the AHFA’s Mortgage Savings Program

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The Alabama Housing Finance Authority has officially opened its Mortgage Credit Certificate program to more home buyers! This expansion of the AHFA’s mortgage savings program is all thanks to new and increased income and sales price limits.

About the AHFA’s Mortgage Savings Program

First and foremost, let’s review what the Alabama Housing Finance Authority (AHFA) is. According to the Alabama Housing Finance Authority website, AHFA is dedicated to serving the housing needs of low- and moderate-income Alabamians by creating housing opportunities through affordable financing.

So, what exactly is the Mortgage Credit Certificate (MCC) program? The Mortgage Credit Certificate program is a savings option for Alabama homebuyers that provides a tax credit to reduce the amount of federal taxes owed by a percentage of the annual mortgage interest paid each year. The remaining annual interest can then still be claimed as a mortgage interest deduction on the homebuyer’s federal tax return.

The catch? Qualified homeowners must meet federally-established income and sales price limits, which have recently been increased!

Expansion of the AHFA’s Mortgage Savings Program

Set by the U.S. Department of Housing and Urban Development, the new income limits increased over 2022 by 8.2 percent due to increasing median incomes and economic gains.

Now, qualifying households can earn up to $111,440 annually, depending on location and family size.

In addition, the maximum sales prices for the home purchase has risen to $588,104 in “target” areas and $481,176 in “non-target” areas.

On an individual basis, the AHFA will verify each property’s location and apply the appropriate limit. This expansion of the AHFA’s mortgage savings program is huge and benefits many of MCC program participants.

Summary

The expansion of the AHFA’s mortgage savings program will ultimately save home buyers money and free up income to qualify for nicer homes.

For more industry news and real estate updates, continue reading our blogs.