Contract contingencies protect buyers from unforeseen problems with homes. They provide a simple way to negotiate repairs, negotiate the sale price, render a contract null and void, and protect your earnest money if you choose to walk away (earnest money will be returned due to a failed contingency).
But adding too many contingencies can be risky. When other buyers are making offers on the same home, a seller might favor an offer with fewer contingencies. It is wise to partner with a buyer’s agent who will help guide you through the process and make your offer as attractive as possible without sacrificing necessary contingency items. Here are the most popular buyer & seller contract contingencies, and a couple of New Hampshire specific contingencies to understand and consider while working with your real estate agent to draft a formal offer on your Southern New Hampshire property.
The Top Six Contingencies
Home Inspection: A home inspection will identify any major problems with the condition of a home. The major systems (including electrical, HVAC, and plumbing) and structural components (including foundation, roof, rooms, and attic) will be inspected. If major flaws are revealed you will have the option to request repairs, negotiate a lower price, or simply walk away from a property when included in the contract contingencies. Home inspections aren’t always required by lenders to obtain a mortgage, but they are always in your best interest. The buyer pays for a home inspection. The cost is typically between $300-$450.
Home Sale Contingency: A buyer who needs to sell their current home to free up cash for the financing of the new home will protect themselves by including a home sale contingency. If they are unable to find a buyer for their current home by a date indicated on the contract, either party can choose to terminate the contract.
Home Appraisal Contingency: Banks will not lend money to borrowers to purchase a home for more than it is worth. If the appraisal comes back lower than the contract price either party can consider the contract null and void. Alternatively, the buyer and seller can renegotiate the purchase price with respect to the appraised value, appeal the appraisal or agree on additional time for a buyer to obtain financing from a different lender.
Financing Contingency: The mortgage contingency (aka the financing contingency) will state a window of time the buyer has to secure financing for the home. If a loan cannot be secured in time either party can consider the contract null and void. The seller can put the property back on the market and find a different buyer.
Title Contingency: A clear title for a property is important. Loan officers sometimes require a clear title before approving a mortgage. A real estate attorney or title agent will look at a home’s legal history and ensure no liens, claims or other legal issues are connected to a property (this is to make clear who owns the property, and no additional entity can claim a stake in the property).
Home Insurance Contingency: Home insurance isn’t required by law in any state, but most lenders will require it for a mortgage. If you are unable to obtain homeowner’s insurance either party can consider the contract null and void.
New Hampshire Contingencies to Consider
Termite Inspection: A termite inspection is usually required by a lender. It is performed independently of a home inspection. It is usually wise to include it as a contingency in the state of New Hampshire. Dry-wood termites are not native. Subterranean termites are, especially in the southern region of the state. They can cause structural damage when left uncontrolled. If a report uncovers termite damage you can choose to negotiate the sale price, negotiate the treatment price or consider the contract null and void.
Radon Gas Inspection: Every home has some level of radon. It is a naturally occurring radioactive gas, but it isn’t good for you. It is produced when radioactive metals (uranium, thorium, or radium) break down in rocks, soil, and groundwater. We have our fair share of granite in The Granite State (hence the nickname). Small amounts of uranium are present in the granite. Radon levels in New Hampshire are above average due to our abundance of granite.
Radon can enter homes through the foundation, private wells, sinks, showers, and toilets. Fortunately, radon mitigation systems are relatively inexpensive ($778-$1,223). A contingency in your contract will help protect you from taking on mitigation costs, or you can consider the contract null and void if the radon testing indicates levels above the recommended amount.