Contingencies are an important part of the homebuying process, giving buyers a safety net during the transaction. They are conditions written into the purchase agreement that must be satisfied for the sale to move forward, allowing either party to back out without penalty if specific terms aren’t met.
Although not required, contingencies are standard in most real estate contracts, and some are especially important depending on the location. For example, in wildfire-prone areas like Los Angeles, including a homeowners insurance contingency can ensure the property is insurable before you commit.
This Redfin real estate article explains how contingencies work, which ones to expect, and how they can help you avoid costly surprises during the homebuying process.
What are contingencies in real estate?
In real estate, a contingency is a condition written into a purchase agreement that must be met for the sale to move forward. In other words, it’s a clause that makes the deal dependent on certain requirements being satisfied – like the home passing inspection, appraising at value, or the buyer securing financing.
Contingencies act as a safety net. They protect buyers by allowing them to renegotiate or walk away without losing their earnest money deposit if a critical condition isn’t met. At the same time, they provide sellers with a clear framework and timeline, so everyone knows what steps need to be completed and by when.
For example, an inspection contingency might give a buyer ten days to review the property and request repairs or cancel the contract. During that time, the seller knows the process is moving forward and has a defined window to address any concerns.
What is a contingent offer, and how does it work?
When a buyer submits a contingent offer, it means they’re making an offer to purchase a home that depends on certain conditions being met, such as inspections, appraisals, or securing financing. The sale can only move forward if these conditions are satisfied.
Once the seller accepts the contingent offer, the home is usually listed as contingent, showing there’s an active offer but the sale isn’t final. Each contingency has a deadline, called the contingency period. Buyers must complete their due diligence and meet conditions during this set timeframe. Missing a deadline can put their earnest money at risk.
During the contingency period, buyers have opportunities to negotiate. For example, after a home inspection, they can request repairs, a reduced price, or credits to address any issues found.
If a contingency isn’t met within the agreed-upon timeframe, the buyer can terminate the contract and typically receive their earnest money back.
The top 8 most common contingencies to consider in your offer
When submitting an offer on a home, including the right contingencies is crucial. Contingencies give buyers the ability to confirm important aspects of the property, financing, and legal ownership before fully committing.
Below, we’ll explain how the following common real estate contingencies work and the protections they provide:
- Home inspection contingency
- Appraisal contingency
- Financing contingency
- Title contingency
- Home sale contingency
- Home insurance contingency
- Kick-out clause
- HOA contingency
1. Home inspection contingency
The home inspection contingency is one of the most frequently used contingencies in real estate. It gives the buyer the right to have the home professionally inspected, usually within 7 to 10 days after the offer is accepted. If the inspection uncovers significant issues, such as foundation damage, roof problems, or mold, the buyer can:
- Request repairs or credits from the seller
- Renegotiate the purchase price or contract terms
- Cancel the contract and retain their earnest money deposit
➤ The home inspection contingency protects buyers from unexpected repair costs and ensures they know the true condition of the property before closing.
2. Appraisal contingency
The appraisal contingency comes into play when a buyer is financing a home. Lenders require an appraisal to confirm the property’s value supports the loan amount. If the appraisal comes in lower than the agreed purchase price, the buyer can:
- Cover the difference in cash
- Renegotiate the price
- Exit the contract
Renegotiation is common, giving both the buyer and seller a chance to adjust the price or terms to reflect the home’s appraised value.
➤ The appraisal contingency protects buyers from overpaying and lenders from financing more than the home is worth.
3. Financing (mortgage) contingency
A financing contingency, also known as a mortgage contingency, allows the buyer to back out of the sale if they’re unable to secure mortgage approval, usually 21 to 30 days. Reasons for denial can include credit issues, job changes, or changes in loan terms.
If financing falls through, the buyer can withdraw from the contract and get their earnest money back. However, many buyers work with their lender to explore alternative financing options before canceling.
➤ This contingency protects buyers from being contractually obligated to purchase a home they can’t afford to finance.
4. Title contingency
A title contingency gives the buyer the right to review the results of a title search and cancel the contract if any issues related to ownership or property rights are discovered. The title company usually conducts this search shortly after the contract is signed.
Common title issues include:
- Unpaid property taxes or contractor liens
- Boundary disputes or easements
- Undisclosed heirs or prior claims of ownership
- Errors in public records or deeds
If a problem is found, the seller is generally given a window to resolve it, such as clearing a lien or correcting a legal error. If they can’t deliver a clear title by the closing date, the buyer can back out and recover their earnest money.
➤ This contingency protects buyers from inheriting legal, financial, or ownership complications tied to the property.
5. Home sale contingency
A home sale contingency makes the purchase dependent on the buyer selling their current home within a specified period. If the buyer cannot sell their home in time, they can cancel the contract without losing their earnest money.
This contingency is often used by buyers who need the proceeds from their existing home to complete the purchase. Sellers may view these offers as less attractive because they can introduce uncertainty or delays.
Contracts with this clause typically specify key details, such as whether the buyer’s current home is already under contract and the timeframe for completing the sale. Sellers may include a kick-out clause, which permits them to continue marketing the home and accept backup offers.
➤ The home sale contingency protects buyers from being obligated to purchase a new home before they’ve sold their current one.
6. Homeowners insurance contingency
A homeowners insurance contingency allows the buyer to confirm they can obtain adequate homeowners insurance for the property at a reasonable cost. If the buyer is unable to secure coverage – due to factors like location, condition, or risk exposure – they can cancel the contract without penalty.
This contingency is especially important in areas prone to natural disasters, such as floods, wildfires, or hurricanes, where insurance may be limited or expensive.
➤ The homeowners insurance contingency protects the buyer from being locked into a purchase they cannot insure or afford to insure.
7. Kick-out clause/contingency
A kick-out clause is a contingency used by sellers when accepting an offer that includes a home sale contingency. It allows the seller to continue marketing their property and accept backup offers even after entering into a contract with a buyer.
If another buyer submits a stronger offer, the seller can notify the original, bumpable buyer, who typically has 24 to 72 hours to either:
- Remove their home sale contingency and proceed with the purchase, or
- Walk away and allow the seller to accept the new offer
This clause must be clearly outlined in the purchase agreement, including the required notice period and response timeframe.
➤ The kick-out clause protects the seller from being locked into a lengthy contract with a buyer who may not be able to close, giving them the flexibility to pursue better-qualified offers.
8. Homeowners association (HOA) contingency
A homeowners association (HOA) contingency applies to homes or condos governed by an HOA. It gives buyers the right to review HOA agreements, rules, and financial documents before fully committing to the purchase.
If the buyer doesn’t receive the necessary documentation in time, or if they disagree with the HOA’s obligations or restrictions, they can cancel the contract without losing their earnest money.
➤ The HOA contingency protects buyers from unexpected fees, rules, or restrictions that could affect their ownership experience.
What happens if a contingency isn’t met?
If a contingency isn’t satisfied within the agreed-upon timeframe, the buyer typically has the right to terminate the contract and get their earnest money back. Buyers can also choose to renegotiate instead of walking away. For example, after an inspection reveals issues, the buyer might request repairs, credits, or a price reduction.
Remember: deadlines are critical. Buyers must complete all contingency-related tasks within the specified periods. Missing a deadline without an extension could result in losing the earnest money or other legal consequences.
If a contingency isn’t met and the buyer terminates, the seller will typically relist the home or put it back on the market, opening the door for other buyers to submit offers.
FAQs about contingencies in real estate
What does contingent mean in real estate?
In real estate, contingent means a home is under contract, but the sale depends on certain conditions (called contingencies) being met. If those conditions aren’t satisfied, the buyer can usually back out without losing their earnest money.
What contingencies should I include when buying a house?
Which contingencies you should include will ultimately depend on factors such as the home’s condition, location, and your financial situation. That said, most buyers benefit from including inspection, appraisal, and financing contingencies, especially if they’re receiving a mortgage loan.
In certain areas, additional contingencies may be especially important. For example, if you’re buying a home in St. George, UT where wildfires are a risk, or in coastal Florida cities like Fort Lauderdale or Naples that are prone to hurricanes and flooding, it can be wise to include a home insurance contingency.
Are contingencies required in a real estate contract?
No, but they’re common. Buyers often include them to protect against risks like failed financing or major home defects. Waiving contingencies can strengthen an offer but increases the buyer’s exposure to risk.
What’s the difference between pending and contingent?
A contingent listing is still under contract but waiting for specific conditions to be met. A pending listing means all contingencies have been cleared and the sale is in its final stages before closing.
Is it risky to waive contingencies?
Yes. Waiving contingencies, like the inspection, can make an offer more competitive, but it increases the buyer’s financial and legal risk. If problems arise, the buyer may have no contractual way out.
Can you remove contingencies after an offer is accepted?
Yes, contingencies can be removed or waived after the offer is accepted – either voluntarily by the buyer or after certain deadlines pass. In some cases, buyers may be required to formally remove them in writing to keep the contract moving forward.
Can a seller accept another offer while a property is contingent?
In most cases, no, unless the contract includes a kick-out clause. Without one, the seller is typically obligated to honor the original agreement while the contingencies are being resolved.
Is it common for contingent offers to fall through?
Most contingent offers still make it to closing. That said, when deals do fall through, common reasons include issues with inspections, appraisals, or financing.
The post A Buyer’s Guide to the 8 Most Common Real Estate Contingencies appeared first on Redfin | Real Estate Tips for Home Buying, Selling & More.
