Cost of Contingencies: Exploring The Importance And The Cost Of Contract Contingencies

When a buyer decides to place an offer to purchase a home, there’s a lengthy contract involved. One of the reasons the contract can be lengthy is because it provides every individual buyer with options for the terms that they will purchase the house under. It’s a “choose your own adventure” if you will. These options are referred to as contingencies. Some common contingencies include financing, home inspection, appraisal, and radon testing, to name a few. Let’s explore together some of the most common contingencies and the costs associated with them. 

Home Inspection Costs - Peering into the Foundation:

A home inspection is a critical step in the home-buying process, designed to unearth potential issues that may not be immediately apparent. While the cost of a home inspection varies by location and the property size, it's a small price to pay for the peace of mind it provides. Expect to invest a few hundred dollars in a comprehensive inspection that covers structural integrity, electrical systems, plumbing, and more. Opting for a home inspection has really increased in popularity through the last few decades because of the additional layer of protection it adds for the buyer. 

Appraisal Fees - Assessing the True Value:

Lenders require a professional appraisal to determine the property's fair market value. An appraiser evaluates various factors, such as the home's condition, recent comparable sales, and the overall real estate market. Like home inspections, Appraisal Fees vary depending on both your geographic area and the individual licensee. 

Septic Tests - Ensuring a Healthy System:

In urban areas, most homes are on city water and septic. In more rural areas, however, septic systems are very common. Testing well and septic involves inspecting the tank and drain field to identify potential issues. It’s important to ask your realtor about well and septic tests if putting an offer to purchase on a home that isn’t on city water.  Keep in mind that your offer can indicate if you’d like the buyer or seller to cover the cost of the testing. 

Radon Testing - Detecting an Invisible Threat:

Radon is a colorless, odorless gas that can seep into homes and pose health risks. If you’re purchasing a home in an area known to have radon, it may be wise to opt for a radon test in your offer to purchase. Ask your Realtor if there is any known radon present in the area to help you decide if you should include this contingency. 

Conclusion:

Each contingency typically adds additional costs during the homebuying process. However, these tests help to ensure that you have all the information you need to make an informed decision about purchasing a home. Every buyer has the option to elect or decline each one of these contingencies. You can ask your Realtor or Lender for an estimate of what each test costs to perform in your local area before deciding whether to include a contingency or not in your offer. If you have any questions about any of these contingencies, please reach out to an Imagine Home Lending Mortgage Loan Officer today!