Common Home-Buying Contingencies You Need To Know


Buying a home is a major financial decision, so it’s important to understand all the contingencies that come with the process.

When you make an offer on a home, you’ll typically include contingencies that will protect both you and the seller in the event that something doesn’t go according to plan. In this blog post, we’ll discuss the most common home-buying contingencies and explain how they can help you make a more informed decision.

Knowing the details of these contingencies can help you navigate the home-buying process with more confidence, so keep Reading to learn more!

What is a real estate contingency?

A contingency is an agreement between a buyer and a seller that specifies what must happen to finalize the purchase contract.

In real estate contracts, a contingency prevents the Sale from being final until all of its requirements have been met and gives you some protection from buying something you may regret later on.

Contingencies can be financial or non-financial, such as:

  • Inspection of the property by the buyer before closing

  • The buyer obtaining financing (a loan)

  • A home inspection by an independent professional who looks at all aspects of the house

Why are contingencies necessary?

One of the biggest reasons that buying a home is so stressful is that there’s so much that can go wrong. And when it comes to big purchases like this, it’s important to have some protection against unexpected problems.

A contingency gives you the opportunity to make sure that your finances are in order and that you can afford the home before making a commitment. This is especially important if you’re purchasing a new home and have never bought one before.

In terms of what can go wrong with a home purchase, there are a few areas where you might want to consider putting a contingency in your contract:

  • If an inspection is required and the inspector finds something that needs to be fixed before you can close on the house, you’ll want to ensure your contract includes a clause about how long you have to get it fixed.
  • If there are any issues with the title or property taxes, those will also need to be sorted out before closing. Your contract should also include how long you have to get those fixed before closing.
  • If any repairs need to be done on the property (like painting or landscaping), those should also be included in your contract so that they don’t happen after closing and leave you responsible for them.

A home inspection contingency

The home inspection contingency is one of the most common contingencies. This gives you time to check out your new home and see if it has any defects or major issues that need to be addressed before you sign over your money and make the purchase final.

You’ll either hire an inspector yourself or ask your agent to do so.

If you are buying a new house, it’s best not to use this as a reason for canceling an offer unless there is something seriously wrong with it—and even then, it’s often better just to negotiate on price instead of risking losing out entirely.

An appraisal contingency

An appraisal contingency is a clause in a real estate contract that allows the buyer to back out of the deal if the appraised value of the home is less than the agreed-upon purchase price.

The appraisal contingency ensures that the buyer is not overpaying for a home and helps you determine the fair market value of the home.

A financing (or mortgage) contingency

A financing contingency is a contingency that allows the buyer to back out of the sale if they are unable to secure financing.

A buyer may have trouble getting a mortgage because of their credit score, income level, or other factors. If that’s the case, they can include a financing contingency in their offer so that they can back out of the deal if they’re unable to secure financing before closing.

The seller may also ask for a financing contingency, so that if the buyer cannot get financing, their deposit will be returned to them. This protects both parties in case something goes wrong with the deal.

If it turns out that your home loan request has problems (for example, if there are too many liens against the property), then it could be difficult for your real estate attorney to find another mortgage lender who would feel comfortable lending money on such a property.

In this case, canceling your contract may be the best option for both parties involved in buying or selling real estate (this is called “walking away from a deal”).

Home sale contingency

A home sale contingency is a clause in a contract that gives you the right to back out of the deal if you don’t sell your current home before closing on the new one.

This means that if you don’t sell your existing home before closing on the new purchase contract, you can cancel the sale and walk away from new property.

Home sale contingencies allow you to sell your current house before buying another, so that you don’t end up with two mortgages and a lot of debt.

This contingency can be used in conjunction with any other contingency and is typically used in conjunction with a financing contingency.

A title contingency

Title insurance is a form of professional indemnity insurance that protects the home buyer against losses arising from defects in the real estate title. Title insurance protects both buyers and sellers, so it’s not just something you get when you’re buying a home.

To be clear: title insurance isn’t required by law and is purchased from a private title company. However, it’s highly recommended by most real estate agents and mortgage lenders because there are many reasons why you would want to make sure your purchase has been checked out thoroughly before making an offer on a house. Here is one example:

  • You don’t want any surprises down the road after you’ve bought the home if there are issues with its title (e.g., liens or easements).

What happens if a contingency isn’t met?

If you’re a buyer and one of your contingencies isn’t met, here are some options:

  • You can back out of the deal.

  • You and the seller can renegotiate the terms of your deal to make it work.

  • If you ask for money back or a credit towards closing costs, moving costs or anything else in lieu of meeting a contingency, you’re likely to lose out on some cash. The seller will negotiate hard on this point because they want to get as much money as possible from selling their home and making sure that they don’t have to give up too much when it comes time for one party or another to walk away from negotiations.

Can the buyer back out if all contingencies are met?

It is possible for a buyer to back out of a sale if all contingencies are met. However, if they do so, they won’t be able to recover their earnest money deposit unless the seller agrees to give it back.

Contingencies are intended to protect

In short, contingencies are intended to protect buyers in the event specific conditions don’t get met.

There are several common contingencies that you may encounter during your home-buying process. You should always consult with a local real estate agent about any additional requirements for your specific location.

For example, if there has been damage from a natural disaster or civil unrest within the past year at an address on a property that you’re interested in purchasing, then it’s likely there will be some sort of contingency included in the purchase agreement requiring repairs to be made before closing can take place. The seller would have this right so they won’t lose money if those repairs aren’t completed or cannot be completed by closing time (and thus cannot sell their house).

If this happens and you move forward with closing despite not having resolved these issues beforehand, then it is possible that all parties involved could face consequences ranging from fines up to criminal prosecution depending on how severe the issue(s) were prior


I hope this article has helped you understand what a contingency clause is and how they should be used in your real estate transactions from now on.

There are many contingencies but the most important contingency clauses are inspection contingencies, appraisal contingencies, and financing contingencies.

When you’re buying a home, it’s important to know what your contingency clauses are and how they work. These clauses give buyers some protection from unexpected events that could cost them money or take away from their overall experience in the process.

If your realtor has explained these details to you and helped make sure that everything is in order before signing on the dotted line, there should be no surprises when it comes time for closing!

Kurby Team

The Kurby Content Team is a diverse group of seasoned real estate experts dedicated to providing insightful, reliable information for homebuyers, real estate investors, and real estate agents. With backgrounds ranging from real estate brokerage, property investment, and residential home buying, our team combines decades of experience with a passion for demystifying the real estate world. We at Kurby are committed to helping you make informed, successful real estate decisions. Whether you're a first-time homebuyer, a seasoned investor, or a real estate professional, count on the Kurby Content Team to deliver the most relevant, actionable real estate content you need.

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