When it comes to buying a house, there are a lot of terms and conditions that can be confusing for first-time homebuyers. One of those is the earnest money contingency contract. This contract is an important part of the home buying process, so it`s important to understand what it is and why it matters.
An earnest money contingency contract is a legal document that is signed by both the buyer and the seller during the home buying process. It outlines the terms and conditions of the sale and specifies the amount of earnest money that the buyer will put down as a deposit.
Put simply, earnest money is a deposit that the buyer puts down to show that they are serious about purchasing the home. This deposit is typically around 1-2% of the purchase price of the home, although the amount can vary depending on the location and the market conditions.
The purpose of the earnest money contingency contract is to protect both the buyer and the seller. For the seller, the contract ensures that the buyer is serious about purchasing the home and has the financial means to do so. For the buyer, the contract ensures that their earnest money deposit will be returned if certain conditions are not met.
The most common condition that is outlined in an earnest money contingency contract is the home inspection contingency. This contingency allows the buyer to have the home inspected by a professional inspector. If the inspection reveals any major issues with the home, the buyer can back out of the sale and their earnest money deposit will be returned.
Other common contingencies that may be included in an earnest money contingency contract include the appraisal contingency, which allows the buyer to back out of the sale if the home is appraised at less than the purchase price, and the financing contingency, which allows the buyer to back out of the sale if they are unable to secure financing for the home.
In short, an earnest money contingency contract is an important part of the home buying process. It protects both the buyer and the seller and ensures that the sale goes smoothly. If you`re in the market for a new home, make sure to consult with a real estate professional to ensure that you understand the terms and conditions of the earnest money contingency contract.