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TO PURCHASE REAL ESTATE - THE BASICS
in a purchase offer
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.
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.
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.