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Contingencies
in an Offer to Purchase Real Estate
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.
Or worse.
copyright 2000 by Terry
Light and RealEstate ABC |
