Buying a home is not just stressful. It is also risky. If you choose the wrong property or pay the wrong price, you could lose money on the transaction. You could also get yourself in well over your head and have a hard time maintaining the property while making your monthly payments.
There are a few ways that you can reduce the risk that you have when buying a property. Protecting yourself when you make an offer can make buying a property a little less intimidating.
Know what contingencies to include in your offer
If you don’t limit the terms of your offer, you might need to follow through with the transaction even when you no longer wish to do so.
Common buyer contingencies for real estate transactions include a financing contingency and an inspection contingency. If you can’t get a lender to approve the mortgage amount for the property or if the inspection turns up tens of thousands of property issues, you can then potentially cancel the closing without risking your earnest money.
Negotiate seller occupancy
One of the biggest mistakes people make on a seller’s market is to assume that the seller will move out quickly after closing. The seller might struggle to find a new place to live after selling their home and might still be in your new house when you have the right to take possession.
If your offer includes terms that restrict the seller’s right to stay and charge them money for staying, you will not only motivate them to move out but will have the right to take legal action against them if they fail to do so.
Leave some cushion in your finances
One of the worst things that home buyers do to themselves is to get in way over their heads. If you intend to make an offer over the asking price, you need to make sure that there is enough wiggle room in your pre-approval arrangements to accommodate that higher amount. You also need to look at your available credit and cash reserves to ensure that you can absorb one or two emergency expenses in the 12 months after closing.
By identifying possible risk factors in a residential real estate purchase, you can limit how much risk you have in the early stages of the transaction.