Contingencies in an Offer to Purchase Real Estate
Contingency is not always a bad word. Contingencies are circumstances associated with the purchase contact when buying a home. They are put in place to protect both the buyer and seller. While some contingencies may not be desired by both parties it is still necessary to outline the contingencies on both the offer form and the purchase and sales contract (P&S). Contingencies will allow you to cancel the contract without penalty should something go wrong
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.
