Common Real Estate Contingencies Explained

Buying or selling a home is a significant chapter in anyone’s life. It’s exciting, but it’s also overwhelming. One of the elements that often confuses first-time buyers and sellers are the contingencies that pop up in real estate contracts. What are they, and why are they important? Read on to find out, as well as the most common contingencies you’re likely to encounter when buying or selling a home. 

What is a real estate contingency? 

Imagine you’re ordering a brand-new car. Before you part with your cash, you likely want to know that if the car arrives and it’s not what you were expecting, you can return it, right? This is a contingency you might encounter when buying a new car, and similar contingencies apply when buying a home. 

In the world of real estate, contingencies are your safety net. They protect both buyers and sellers from unforeseen circumstances and provide a structured plan to navigate those ‘what if’ scenarios. But, like most things in real estate, they are often complex and multi-layered, so we’ll explain some of the most common contingencies in the next section. 

8 Common Types of Real Estate Contingencies

  1. Financing Contingency

This is one of the most common types of contingency, also known as a mortgage contingency. Essentially, a financing contingency states that your offer to buy a home is contingent, or dependent, on you securing a mortgage.

This ensures that buyers can back out of a sale if they can’t afford it, and sellers can find a new buyer if a seller cannot afford to buy the home. 

  1. Home Inspection Contingency

The home inspection contingency gives a buyer a set period to have the property inspected. This gives a buyer an opportunity to back out of a deal, negotiate the price, or ask the seller to fix certain issues if significant problems are found during the inspection.

  1. Appraisal Contingency

An appraisal contingency means that if the home’s appraised value comes in lower than the purchase price, you can renegotiate the deal or back out without penalty. This ensures buyers aren’t overpaying for a property, and will be able to secure a mortgage for the property. 

  1. Home Sale Contingency

A home sale contingency means that a buyer’s purchase of a new home depends on the successful sale of their old home. This is another common contingency since few people are able to afford their new home without the proceeds from their home’s sale. 

  1. Title Contingency

A title contingency gives a buyer the right to review the property’s title history. If there are claims, liens, or legal issues, they can back out of the purchase. This ensures a buyer doesn’t encounter unexpected legal issues during or after the property’s purchase. 

  1. Insurance Continency 

This contingency, and those following it, aren’t quite as common as these first 5 but are still contingencies you should know about. An insurance contingency allows a buyer to back out of a sale agreement if they are unable to secure homeowner’s insurance for the property. This is usually only used in areas prone to natural disasters, where homeowner’s insurance can be difficult or expensive to obtain. 

  1. Kick-Out Contingency 

In situations where a seller has accepted an offer from a buyer with a home sale contingency (meaning they need to sell their house and they do not yet have a buyer), a seller may include a kick-out contingency. This means they can continue to market the property, and if they receive another comparable offer from a buyer who is ready to move, the original buyer will have 48-72 hours to show they can proceed with the purchase, or the seller can end the agreement and sell to the new buyer. 

  1. Repair Contingency 

In some cases, especially in the case where a problem is discovered during the home inspection, a buyer may include a repair contingency saying they will only complete the sale once certain repairs have been carried out. 

How to Navigate Contingencies as a Buyer

Contingencies help both buyers and sellers protect their interests during the home-buying process. When buying a home, make sure you talk to your real estate agent about any contingencies that should or may be included when you put in an offer on a property. Remember that sellers may be put off if you want to use dozens of contingencies to protect your interests, so make sure you know which are completely necessary for you. 

In competitive markets, some buyers will waive contingencies to make their offer more attractive. This can be tempting when you love a house and there is a lot of interest, but make sure you step cautiously so you don’t end up with a home that’s a problem. 

How to Navigate Contingencies as a Seller

Contingencies can help you ensure you get a quick sale and aren’t tied to a buyer that will take a long time to reach closing. Of course, buyer contingencies can make it more likely that your sale will fall through. As a seller, you need to weigh the attractiveness of an offer against the potential risk and delays that its contingencies may introduce.

Contingencies can provide a platform for negotiation. If a home inspection reveals issues, you can choose to fix them, offer credit, or renegotiate the price. Your real estate agent can guide you through this process, helping to determine what makes the most sense in your particular situation.

Sell Your Home with Ease

As a buyer, contingencies are your safety net, helping you avoid costly surprises and ensuring that you’re making a sound investment. As a seller, they’re factors to consider when evaluating offers and having some control over your sale timeline.

However, if the thought of managing contingencies and navigating the complexities of a traditional home sale feels overwhelming, there is an alternative. If you’re in Massachusetts, we offer a straightforward, stress-free option: a cash offer for your home.

Our process eliminates the uncertainties of contingencies. No worrying about the results of a home inspection or sweating over a buyer’s financing falling through. And best of all, we buy homes in as-is condition, meaning you won’t need to spend time or money on repairs or improvements before closing.

By choosing our cash offer option, you can bypass the usual stress and hassle, making the process easier than ever. You can transition from your current home to your future plans smoothly, securely, and on your own timeline. To learn more about how we buy homes or to get a cash offer for your home, click here. 

Learn how to sell your house fast without a real estate agent...

Selling a property in today's market can be confusing. Get in touch with us by submitting the form below and we'll get back to you to discuss your options.

Sell My House for Cash

  • This field is for validation purposes and should be left unchanged.