In
most purchase transactions there may be a slight challenge or two, but
most things will go quite smoothly. However, you want to anticipate
potential problems so that if something does go wrong, you can cancel
the contract without penalty. These are called "contingencies" and you
must be sure to include them when you offer to buy a home.
For
example, some "move-up" buyers often agree to purchase a home before
selling their previous home. Even if the home is already sold, it is
probably a "pending sale" and has not closed. Therefore, you should make
closing your own sale a condition of your offer. If you do not include
this as a contingency, you may find yourself making two mortgage payments
instead of one.
There are
other common contingencies you should include in your offer. Since you
probably need a mortgage to buy the home, a condition of your offer should
be that you successfully obtain suitable financing. Another condition
should be that the property appraises for at least what you agreed to pay
for it. During the escrow period you are likely to require certain
inspections, and another contingency should be that it pass those
inspections.
Basically,
contingencies protect you in case you cannot perform or choose not to
perform on a promise to buy a home. If you cancel a contract without
having built-in conditions and contingencies, you could find yourself
forfeiting your earnest money deposit.
