Real Estate Contingencies Defined
What is a real estate contingency? We define the 6 most common clauses—Inspection, Financing, Appraisal, Septic, and the Home Sale Contingency—and the risks they pose to sellers.
What’s a contingency in real estate? It’s basically a “yes, but...” clause in a real estate contract. The sale can happen—but only if certain conditions are met. Think of it like a flowchart: Thing B (change of ownership) will happen if Thing A (the contingency) goes according to plan.
Buyers almost always include a few contingencies in offers. As a seller, understanding what these contingencies are—and what risk each poses to your deal and ultimately to your sales momentum—is key to evaluating the quality of the offer. Let’s break down the most common:
Inspection Contingency
You might say this is the big one, but put a pin in that claim because I’ll argue that a different contingency poses a bigger threat. The inspection is the most likely deal-breaker in any SINGLE real estate contract. The inspection clause gives buyers a set period of time to hire a home inspector, review the report, and either move forward, renegotiate… or pull the plug with no explanation required.
This one can blow up the deal on a whim. The buyer can simply change their mind. Or maybe the inspection stokes a buyer’s fears around maintaining a home and facing expensive repairs. The buyer can back out with no input from seller. They can just send over the termination and the deal is dead. Or, they can make like difficult by renegotiating. We often recommend a pre-inspection before you even list your house. Yes, it’s money out of pocket, but it puts you in more control of what gets fixed, how it gets fixed, and what’s disclosed upfront.
Time is the enemy in real estate. Shrink those timelines whenever possible. If someone asks for a 10 day home inspection, shorten that to 5 days or less! If the buyer is destined to back out, at least you won’t lose a lot of marketing time to find out.
Financing Contingency
Even with a pre-approval letter there is no guarantee. A lender can still deny the loan late in the game—if the buyer changes jobs, racks up credit card debt, or does something unwise like buying a new car before closing.
That’s why I encourage sellers to go one step further: Have your agent talk directly to the buyer’s lender. Was this a full approval with verified assets and income, or just a phone call? You can learn a lot in a 2-minute conversation—sometimes even pick up on a vibe. “These buyers are golden” is something I hear lenders say a lot and it is music to my ears. “They should be okay” is not comforting. It’s good to know up front which kind of pre-approval came with your offer!
Appraisal Contingency
Unless it’s a cash deal or has a very large down payment, the lender will likely send out an appraiser to verify the value of the home. If the appraisal comes in lower than the purchase price, that loan may not go through without negotiating a solution.
You as the seller can do nothing, drop the price, negotiate something else, or buy a new appraisal. Sometimes we even negotiate up front that the buyer will cure a low appraisal up to a threshold by coming in with a larger down payment. Lenders are okay with that.
Septic System Contingency (if applicable)
Have a septic system? You’ll need to have that pumped and inspected. You can do this before listing or wait until you’re under contract. But here’s the thing: if you wait and a problem surfaces, you’ll be racing the clock to fix it—and possibly under pressure to spend more than you might have otherwise had you taken time to shop bids.
Dealing with it upfront gives you breathing room, address matters as cost effectively as possible, and clears that contingency before a buyer ever sees your home.
Home Sale Contingency
This one’s the doozy. I told you earlier there was one that might just be scarier than inspection and that would be this one. Let me explain. A buyer says, “I’ll buy your house… just as soon as I sell mine.” Now your sale is chained to another sale that you don’t control. So all of the contingencies that apply to your sale just doubled. There are now probably two inspections, two appraisals, etc. Plus, the buyer who has to sell their house may price realistically!
Offers that are contingent on the sale of another home are actually referred to as “contingent” offers. This one contingency lays claim to the term itself, probably because it looms so large in terms of risk to your deal. I often council sellers to pass on contingencies early on in the listing. Better to find a buyer that can conceivably perform on day one.
- Title Review: Not a common deal-breaker, but buyers can back out if they spot something funky on the title report. It’s a good idea to have your title company run the title check up front so that buyer can review that when writing their offer.
- HOA or Resale Certificate Review: Common in condos. Also not often a show-stopper very often, but it’s technically a contingency and a buyer could back out if they object to something in the covenants, or budgets, dues, etc. You can also provide this material up front to shore up your eventual contract with a buyer.
Final Thought
Contingencies are not inherently bad. A few exist in practically all transactions. But they do add obstacles, speed bumps and off-ramps to your transaction. The key is knowing which ones are manageable, which ones require more scrutiny, and when you can get ahead of them before they become deal-breakers!
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