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Real Estate contingencies are conditions of the contract that are in place to protect the buyer and seller from things that could go wrong during the transaction. Each condition must be met to ensure that the sale progresses in a timely manner. Your agent will walk you through them step-by-step to make sure the transaction is flawless. But if problems do arise, the contingencies are there to protect you. Contingency clauses can be written for nearly any need or concern. Always be clear on the contract you sign and make sure your agent or attorney has answered all your questions.

Most Common Real Estate Contingencies

Appraisal Contingency

This protects the buyer and is used to ensure a property is valued at a minimum, specified amount. If the property does not appraise for at least the specified amount, the contract can be terminated. An appraisal contingency may include terms that permit the buyer to proceed with the purchase even if the appraisal is below the specified amount, typically within a specified number of days after the buyer receives the notice of appraisal value. The seller might have the opportunity to lower the price to the appraisal amount. The contingency specifies a release date that the buyer must notify the seller of any issues with the appraisal. Otherwise, the contingency will be deemed satisfied, and the buyer will not be able to back out of the transaction.

Financing Contingency

The financing contingency gives the buyer time to apply for and obtain financing for the purchase of the property. This provides important protection for the buyer, who can back out of the contract and reclaim their earnest money in the event they are unable to secure financing from a bank, mortgage broker, or another type of lending institution. A finance contingency will state a specified number of days that the buyer has to obtain financing. The buyer has until this date to terminate the contract (or request an extension that must be agreed to in writing by the seller). Otherwise, the buyer automatically waives the contingency and becomes obligated to purchase the property—even if a loan is not

Home Sale Contingency

A home sale contingency gives the buyer a specified amount of time to sell and settle their existing home in order to finance the new one. This type of contingency protects buyers because, if an existing home doesn’t sell for at least the asking price, the buyer can back out of the contract without legal consequences. This can be difficult on the seller, who may be forced to pass up another offer while waiting for the outcome of the contingency. The seller retains the right to cancel the contract if the buyer’s home is not sold within the specified number of

Inspection Contingency

The Inspection Period gives the buyer the right to have a home inspection within a specified time period (usually 5-15 days). It protects the buyer, who can cancel the contract or negotiate repairs based on the findings of a professional home inspector. The inspector furnishes a report to the buyer detailing any issues discovered during the inspection. At this point the buyer has 4 choices:

    1. Approve the report, and the deal moves forward
    2. Disapprove the report, back out of the deal, and have the earnest money returned
    3. Request time for further inspections if something needs a second look
    4. Request repairs or concession (if the seller agrees, the deal moves forward; if the seller refuses, the buyer can back out of the deal and have their earnest money returned)

Cost-of-Repair Contingency

This is sometimes included in addition to the inspection contingency. This specifies a maximum dollar amount for necessary repairs. If the inspection indicates that repairs will cost more than this dollar amount, the buyer can elect to terminate the contract. In many cases the cost-of-repair contingency is based on a certain percentage of the sales price, such as 1.5% of the purchase price.

Kick-Out Clause

A contingency that is added by sellers to provide a measure of protection against a home sale contingency. While the seller agrees to a home sale contingency, he or she can add a kick-out clause stating that the seller can continue to market the property. If another qualified buyer steps up, the seller gives the current buyer a specified amount of time (such as 72 hours) to remove the home sale contingency and keep the contract alive. Otherwise, the seller can back out of the contract and sell to the new buyer.

Title Contingency

Gives the buyer the option to walk away instead of dealing with any contested ownership claims. For example, that can happen if the house is being sold as part of a divorce or probate.  The buyer has the right to review a title report to assess any liens or easements that exist.

Insurance Approval

Ensures that you can get insurance. If for some reason you can’t or the insurance is outrageously expensive, you should be able to walk.  Things like previous claims for mold, polybutylene pipes, outdated electrical systems, or an old roof can make a house difficult to insure.

Final Walk-Through

It’s common to take a final walk-through the day before closing. Do not skip this step! You want to make sure there hasn’t been any serious damage to the property since you entered into the contract. You’ll also want to check that all agreed-upon repairs have been completed to your satisfaction.

Attorney Review

You may wish to include a clause that allows your attorney to review the contract for a period of time before closing. They can make sure nothing has been removed or sneaked into the contract without your knowledge.  This is especially useful if the seller has added specific clauses or Real Estate contingencies to the contract that your agent is not familiar with.


Real Estate contingencies are not to be taken lightly. It is important to read and understand your contract, paying attention to all specified dates and deadlines. Because time is of the essence, one day (and one missed deadline) can have a negative—and costly—effect on your real estate transaction.

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