Common Real Estate Contingencies
Real estate contingencies are essentially clauses that let you back out of a deal and get your deposit back if they are not met. When you make an offer on a home, you’ll have to decide which contingencies to include Your agent will help you! Depending on what you choose to include, contingencies can make your offer more or less appealing.
It’s important to note that each contingency has its own deadline and all are negotiable - often shortening the deadline can make your offer more competitive.
Inspection Contingency - 17 Days
A home inspection contingency lets you negotiate the price, ask for repairs, or walk away from the sale based on the inspection results.
In a hot market, buyers may choose to pass on the home inspection contingency to make their offer more competitive. While this can help, it can also be risky if items on the property are in bad condition.
See my home inspections post to learn more.
Appraisal Contingency - 17 Days
This contingency allows you to back out of a purchase if the home you are buying appraises for less than the offer amount. Your financing often depends on the appraisal, so this is an important contingency to include.
Home Sale Contingency - 17 Days
This contingency essentially states that you will buy x property if you sell y. Including this contingency in the offer allows buyers to sell their homes before guaranteeing the purchase of another. This is usually based on a specific time period - often 30 or 60 days - after which your contract is forfeited.
If it is a seller’s market, this can put you at a major disadvantage if sellers have multiple offers to choose from.
Mortgage Contingency - 17 Days
This is an important contingency to include if you are buying a home with a loan. It essentially means that if you don’t qualify for a loan, you can back out of the purchase. Pre-Approval is not a guarantee! Your loan still must go through the final stage of underwriting.
These are a few of the most common contingencies you’ll see when buying a home. They all have negotiable deadlines and your real estate agent can help you keep track of them in the escrow process.
If you have further questions about real estate contingencies, contact Megan Majd at (310) 845-6209.