Home purchases grow riskier in hot housing markets

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Recently, six buyers competed to buy the same house in Piedmont, Calif. Four of them had lost out in previous multiple-offer competitions. Two decided that nothing was going to stand in their way this time, so they made contingency-free offers. In areas where demand for listings is high and inventory is low, buyers will compete not only on price but also on terms. The winner is often the buyer who offers the highest price, the quickest close and the fewest contingencies. A contingency protects buyers if they need to satisfy a condition – like arranging financing – for the sale to go through. For example, let's say you have a house that you must sell in order to buy another one. You make your offer on the new home contingent on the sale of the old one within 30 days. If on day 30, you haven't sold your home, you can withdraw from the contract without penalty. The contingency protects you from losing your deposit if your home doesn't sell. On the other hand, suppose you ma...