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A contingency is your get-out-of-contract card.
As such be sure to include it in every contract unless you think you it is a slam dunk for a win.
As a Realtor, I have never written a contract without it. You can make it whatever you want and it is nothing more than an if...then statement. I have never seen a pro-flipper not use one - yet many write contracts on property sight un-seen. They can do that because of contingencies. Some are generally accepted though I have written some that seem outlandish. All that matters is that both sides agree and everything is negotiable.
You should know comps of ballpark ARV and allowable expense (to make the deal work for you) before you put an offer on. It makes no sense to think there is $25k room for repairs only to get a couple of verbal ballparks that need $40k. It won't work. Basically it always comes down to this simple truth:
You win by buying according to your exit strategy.
Want to know what to repair? Visit other homes on area to get a feel and review comps. Get a Realtor for that. Also, don't over-fix or upgrade, you won't get you money back out.
Contractors will do what you tell them to do though the level of fixes that you want may be different than what contractor is used too. I have seen this come up a lot.
(With my contractor and I, it took us a few discussions to identify what vs. how much to fix. I kept focusing on price and I wanted certain upgrades with reason though realized that what I wanted was not feasible...he gave me alternatives that worked.)
I then walk a property, feel it, smell it. Buy a contractor lunch to go with you for his/her time and ask for a verbal ballpark.
I have a contractor friend that can ballpark to within a few thousand (I have tested his numbers-they are solid).
Make offer, perform due diligence regarding contingencies, enact contingencies if needed, or move forward.
I also never lose earnest money if I back out of a deal.
Essentially, all homes are as-is based on price you are willing to pay and a contingency helps you when you get a better idea of what you are buying. If it is not a reasonable win for you based on your goals, why wouldn't you back out?
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