Real Estate Contingencies
In real estate, contingencies are conditions or clauses in a purchase agreement that must be met for the transaction to proceed. They provide legal ways for buyers or sellers to back out of a deal without penalty if certain conditions aren’t satisfied. Common contingencies when buying or selling a home include:
Common Buyer Contingencies
Inspection Contingency
Allows the buyer to have the property inspected within a specified timeframe.
If issues are found (e.g., structural, plumbing, electrical), the buyer can negotiate repairs, request credits, or withdraw from the contract.
Appraisal Contingency
Requires the home to be appraised at or above the agreed purchase price.
If the appraisal is lower, the buyer can negotiate a price reduction, make up the difference, or cancel the contract.
Financing (or Mortgage) Contingency
Gives the buyer time to secure a loan.
If the buyer cannot obtain financing, they can withdraw without losing their earnest money deposit.
Sale of Current Home Contingency
Protects buyers who need to sell their current home before completing the purchase.
If the existing home doesn’t sell, the buyer can exit the agreement.
Title Contingency
Ensures the seller can provide a clear title to the property.
If liens, encumbrances, or disputes over ownership arise, the buyer can withdraw.
Homeowners Association (HOA) Contingency
Allows buyers to review HOA rules and regulations.
Buyers can cancel if they disagree with the terms or fees.
Common Seller Contingencies
Contingency to Find a Replacement Home
The sale is contingent on the seller finding and securing a new property.
Without this, the seller can back out of the deal.
Kick-Out Clause
Protects sellers when buyers include a sale-of-current-home contingency.
It allows the seller to continue marketing the property and accept other offers until the buyer removes their contingency.
Negotiating Contingencies
Contingencies are negotiable and can vary in complexity.
Waiving contingencies (e.g., inspection or appraisal) can make an offer more competitive but also riskier.
Both parties must agree to the terms outlined in the contract.
Contingency Timelines
Contracts typically include deadlines for satisfying contingencies, such as 7–14 days for inspections or 30–45 days for financing.
Missing a deadline may void the contingency or terminate the contract.
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