Offering to buy a home is more than just an offer of something that both sides think may happen in the future. It’s a legally binding contract. It cannot be broken without consequence — such as the loss of money put down at the time. The seller needs to know that offers are serious because accepting one could mean rejecting others or refusing to take more. If the buyer then backs out, that can harm the seller financially as they have to spend more time looking for more offers and may have left a lucrative offer on the table.
There are ways to break an offer, though, and one of the main ones is by adding an inspection contingency to the offer. These contingencies are quite powerful, to the point that some sellers may actually be more prone to take offers without contingencies because they want to keep that power out of a buyer’s hands.
Essentially, the inspection contingency just says that the offer only stands as long as the buyer is allowed to have a third party carry out an inspection on the home. The home then has to pass that inspection. If it does, the offer stands. If it does not, the buyer can back out without penalty.
Many mortgage companies require these. A home that doesn’t pass inspection isn’t worth the market value. It’s worth that minus the cost of repairs to get it to pass. Mortgage companies do not want to take these types of risks with their money.
This is just one type of contingency, but it definitely helps to show why it’s important to know all of your options when buying or selling a home.