Whether you are about to buy your first home or close on a condo in a retirement community, you are financially vulnerable when making an offer on a property. As soon as you submit a written offer to the seller, you are potentially liable to follow through on the promises that you make in that offer. Any earnest money deposited to facilitate the transaction will also be at risk should the closing fail to occur.
There are numerous ways for someone making an offer on real property to protect themselves. The two strategies below are of the utmost importance for those who want to maintain their financial stability while navigating the real estate market.
1. Give yourself a way to cancel if necessary
Buyers have the option of including specific contingencies in their offers. These are clauses that allow you to cancel the closing without any financial penalties. Without the protection of appropriate contingencies, you could be at risk of losing your earnest money, which could be a substantial financial setback.
Even when the transaction falls through for a reason not entirely your fault, your earnest money could be vulnerable. Including contingencies in case you cannot secure financing or there are issues with the inspection will allow you to renegotiate with the seller or walk away from the sale without consequences.
2. Leave yourself a financial safety net
Buyers often offer the most that they can for a property and will also buy a home that represents the maximum amount their lender will finance. It is often smart to leave a little wiggle room there, as you never know when the appraisal might come in low.
There is also the very real possibility of needing to perform unexpected repairs, like a furnace replacement, shortly after taking possession of the property. Without a financial buffer, buyers could find themselves overwhelmed and incapable of properly maintaining the property.
Man buyers have an easier time protecting themselves when they partner with a lawyer, who can help them review documents and adjust their offer to maximize their protection. Thinking ahead to challenges that may arise between when you make the offer and when you have fully moved into the property can help you better protect yourself against unusual complications during a real estate transaction.