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Real Estate Terminology – What Are Contingencies?

Real Estate Terminology – What Are Contingencies?

What Are Contingencies?

When writing an offer on a home purchase, the buyer will write in contingencies, or conditions of the offer. A contingency is a provision in a real estate contract that specifies the contract would cease to exist upon the occurrence of a certain event.

Contingencies protect the buyer in case theycontingencies to a contract cannot perform or choose not to perform on the offer to buy the home. Some contingencies also protect the seller. There are several contingencies that are common.


  • Financing Contingency:  Unless the buyer is paying cash for a home, the financing contingency will insure that if the buyer gets turned down for any reason, they will be released from the contract.
  • Appraisal Contingency:  If the home appraises for less than the contracted price, then the lender will not agree to lend that amount for the home. They have to be assured that if the buyer ever defaults on the loan, they will be able to re-sell the home for the amount loaned on it. In this case, the buyer and seller can renegotiate and work out an agreement to handle the difference. Appraisals can be challenged, if buyers and sellers are patient.If the appraisal on the home is higher than the purchase price, this can be good for the buyer. The loan is not in jeopardy. But not always so good for the seller.
  • Home to Sell Contingency:  If a buyer still has to settle or sell their previous home, they can write in a home-to-sell contingency, or home-to-settle contingency. In a competitive buyers’ market, it is not to the buyer’s advantage to have a home to sell. In a market with high inventory and fewer buyers, it is more feasible.
  • Home Inspection Contingency:  It is always the buyers right and choice to have a home inspection, and it’s highly recommended. If they discover a major flaw in the home that they just can’t live with, they can void the contract. If they find issues that fall under paragraph 21 of the MAR contract, the seller must fix them. (more on paragraph 21 later)
  • Other Inspection Contingencies:  Septic, well, termite or pest inspection, radon, lead paint, and various other inspections can be done, depending on the type of home.
  • HOA Contingency:  The buyer has the right to inspect the HOA documents or condominium documents, and can void after a certain number of days (negotiated in the contract). The buyer can usually void the contract unconditionally, or for any reason if they don’t like what they read in the HOA rules.

Any time that inspections uncover issues, the buyer and seller can renegotiate. Contingencies are a part of real estate contracts and so are renegotiations — but only in limited areas and according to the contract. Some buyers and sellers never fully read the contract — be sure to read yours. Be sure to ask your real estate agent any questions you come up with… that’s what they’re here for.

3 Responses to Real Estate Terminology – What Are Contingencies?

  1. […] your best interests in mind. There are many parts to a good, strong offer: a. Market Value b. Contingencies – Financing, Home Inspection, Appraisal, Time frames… these are just a few. c. Time […]

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