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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.
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