When you offer to buy a home, that offer tends to come with a handful of little asterisks that function as a way to change or rescind the offer if certain conditions aren’t met. Typically there are contingencies in case anything comes up during an inspection, title, or appraisal processes. There’s also contingencies to ensure the buyer’s finances are in line so they’re not still on the hook if the financing falls through because their current house didn’t sell or their financing fell through for an unrelated reason.
When you make a non-contingent offer, you’re taking all the risks. If for some reason your financing falls through, you’re still expected to pay for the house. You could even be taken to court by the owners if they lose income because of it. However, if you know what you’re getting into, and can cover your bases in advance, you can submit a “clean” offer on the home.
Reasons to Make a Non-Contingent Offer
The real estate market is pretty vicious. Especially in the wake of the Covid-19 pandemic. It seems like everyone is looking to change their surroundings. House prices are going up and there are more offers being made on houses. Going in with a bid that’s a completely clean offer, without any contingencies or hiccups, will more appealing than one with all the *asterisks*. If you’re caught in a bidding war, having a clean offer can put yours ahead even if it’s a few thousand dollars behind.
If you’re going to make a non contingent offer, it’s important to do things carefully.
Steps to Making a Non-Contingent Offer
For the most part, the steps are as simple as telling your real estate agent that you want to waive your contingencies, or make a clean offer. They can guide you through the particulars of the paperwork when it’s time. But before you do that, it’s imperative that you have a plan, and a back-up plan just in case there are any hiccups.
Before you make your non-contingent offer, ensure the funding for the house is in order. Pre-approval is not the same as approval. If you’re counting on a mortgage to purchase the home you need to make sure that you’re not out your money and possibly even taken to court for the seller’s loss in income.
If you would normally have a contingency to sell your current home, make sure you can afford two mortgage payments. Keep in mind the debt to income ratio is something your lender will be watching. You can also close on your current home before you make the offer on the new one.
The most important thing is to talk things through with your realtor and lenders. Get specific information for your unique situation.
Ready to Close on a House?
Reach out to us with your questions. At Frank B. Pallotta Law we are licensed Real Estate Lawyers with 20 years of experience. Helping our clients in Georgia navigate the closing process is what we do. We’re committed to demystifying the closing process, one question at a time!