What Are Contingencies and Why Do They Matter?

If you’ve ever been involved in buying or selling a home, you’ve likely heard the term “contingency.” But what exactly are contingencies, and why do they matter so much in a real estate transaction?

Contingencies are conditions written into a real estate contract that must be met for the sale to move forward. They offer important protections—especially for buyers—by creating clear exit points if something goes wrong. Let’s break down the most common types of real estate contingencies and why they’re so essential.

What Is a Real Estate Contingency?

A real estate contingency is a clause in a purchase agreement that makes the sale conditional on certain events or actions. If a contingency isn’t met, the buyer (or seller, depending on the clause) can usually back out of the deal without penalty.

Contingencies act as safety nets. They allow buyers to do due diligence—like securing financing or checking the property’s condition—before fully committing.

Common Types of Real Estate Contingencies

1. Financing Contingency

Also called a loan contingency, this gives the buyer time to secure a mortgage. If they can’t get approved, they can cancel the contract without losing their deposit.

Why it matters: It protects buyers from being legally obligated to buy a home they can’t afford.

2. Home Inspection Contingency

This allows the buyer to have the property inspected. If major issues are found, they can request repairs, renegotiate the price, or walk away.

Why it matters: It ensures buyers don’t inherit hidden problems that could cost thousands in repairs.

3. Appraisal Contingency

If the home appraises for less than the purchase price, this contingency lets the buyer renegotiate or exit the deal.

Why it matters: Lenders won’t finance more than a home is worth. This protects buyers from overpaying.

4. Sale of Current Home Contingency

This gives the buyer time to sell their current home before buying the new one.

Why it matters: It prevents buyers from being stuck with two mortgages at once.

5. Title Contingency

Ensures the seller can provide clear ownership (title) of the property without legal issues.

Why it matters: A clean title is essential to avoid future disputes over ownership.

Why Contingencies Matter

Contingencies benefit both buyers and sellers by:

• Reducing financial risk

• Providing legal protection

• Creating a structured negotiation process

• Helping transactions run smoothly

While contingencies are usually in place to protect buyers, they also give sellers clear expectations and timelines for the deal.

Can Contingencies Be Waived?

Yes—but it comes with risk.

Buyers in competitive markets sometimes waive contingencies to make their offers more appealing. While this can improve your chances of winning a bidding war, it also means you’re taking on more risk.

Before waiving any contingency, consult with your real estate agent or attorney.

Conclusion

Contingencies are a critical part of any real estate contract. They give you peace of mind by allowing you to take necessary steps—like inspections, financing, and due diligence—before locking into one of the biggest purchases of your life.

Whether you’re buying or selling a home, understanding real estate contingencies can help you navigate the process with confidence and clarity.