A contingency in real estate is a contractual condition that must be met for a purchase agreement to become legally binding. It acts as a safety net, allowing buyers or sellers to back out without penalty if specified criteria—like loan approval or a satisfactory inspection—aren’t fulfilled by a set deadline.
Contingencies protect all parties from financial and legal risks. Buyers gain confidence that they won’t overpay or inherit unseen defects. Sellers can limit delays or disputes by clearly defining conditions. Investors use contingencies to preserve capital and maximize returns.
This clause ensures the buyer’s obligation hinges on securing mortgage financing. If the lender denies the loan or terms aren’t acceptable, the buyer can cancel and recover their earnest money deposit.
An inspection contingency lets buyers hire a professional inspector to evaluate the property. If major issues—like structural defects, mold or roof leaks—are discovered and the seller refuses repairs or credits, the buyer may exit the deal.
This protects buyers by requiring the home to appraise at or above the agreed purchase price. If the appraisal is lower, buyers can renegotiate the price or walk away if no agreement is reached.
Buyers who must sell their existing home first include this clause. If they can’t secure a buyer for their current property by a deadline, they’re free to cancel the new purchase without penalty.
A title contingency ensures the seller provides a clear, marketable title free of liens, claims or disputes. Buyers review a title report and can demand resolution of any defects before closing.
Each contingency includes a deadline—often measured in days—by which buyers must satisfy or waive the condition. Common windows: 10–17 days for inspections, 21–30 days for financing and appraisals.
To invoke a contingency, buyers submit formal written notice to the seller within the deadline. Removing (or waiving) a contingency also requires signed documentation, signaling the buyer is satisfied and ready to proceed.
Parties may agree to extend a contingency period via an amendment. Extensions should be requested in writing before the existing deadline expires and must be signed by both buyer and seller.
Contracts specify whether contingency periods run on calendar days (including weekends) or business days (excluding weekends and holidays). Always clarify this to avoid missed deadlines.
Buyers satisfy contingencies by obtaining required reports or approvals. Once received, they submit written confirmation to the seller to proceed toward closing.
“Waiving” a contingency means foregoing the right to back out; “removing” confirms the condition has been met. Both actions require formal notice to the seller.
Failing to meet or remove a contingency by its deadline may forfeit the buyer’s earnest money and expose them to breach-of-contract claims.
All changes—extensions, waivers or contingency removals—must be documented in writing and signed by all parties to be enforceable.
Buyers can shorten contingency periods or limit the number of clauses to strengthen offers. However, doing so raises risk if issues arise.
Sellers prefer fewer or shorter contingencies to reduce uncertainty. They may accept offers with robust proof of funds or preapproval letters.
A higher offer price can offset more contingencies. Conversely, quick timelines may persuade sellers to accept lower bids.
Experienced agents evaluate market conditions, client risk tolerance and property status to recommend optimal contingency terms.
A first-time buyer includes a 15-day inspection contingency. After discovering minor mold, they negotiate a credit for remediation and proceed to closing happily.
A growing family’s offer depends on selling their current home. They agree on a 30-day sale contingency, coordinate showings, and close both transactions back-to-back.
An investor structures a low-earnest-money offer with an appraisal contingency. When the appraisal comes in under value, they renegotiate the price, preserving capital.
Financing depends on loan approval; appraisal ensures the property value meets the contract price.
Most contracts allow 10–17 calendar days for inspection procedures and negotiations.
Yes. In a competitive market, sellers often favor offers with fewer or shorter contingencies.
Buyers must submit a signed removal notice or amendment confirming satisfaction of the condition.
Deliver written notice to the seller if you haven’t sold your current home by the specified date.
If you invoke the appraisal contingency within its deadline, you’re entitled to a full refund of your deposit.
Yes. Parties negotiate extensions in writing and typically split any additional costs or prorate fees per contract terms.
Contingencies are powerful tools to manage risk. Tailor them to your goals, honor deadlines and maintain clear communication to keep transactions on track.
Review your contract’s contingencies with a trusted real estate agent or attorney to ensure you’re protected and positioned for success.
