What Are the Most Common Contingency Clauses?


Here are the four most common contingency clauses.

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When you find the home you want to buy, the transaction starts with the purchase offer you make to the seller. If the seller accepts your offer, a contingency may be attached to it. Here are the most common contingencies in real estate contracts: 1. Chain of sale clause. This means your offer is based on whether or not you can successfully sell your current home within a certain time frame—usually 30, 60, or 90 days. If your home doesn't sell by the end of that period, the contract could end. If you’re buying a home in a down market, this clause might be more feasible. If you’re buying a home in a hot market (like the one we’re in now), it might make it harder for you to compete in a multiple-offer situation. 2. Appraisal contingency. This protects you as a buyer. It’s meant as a way to ensure your future property is valued at a specific minimum price. If the property doesn’t appraise for what’s specified, you can terminate the contract, and in many cases, get your earnest money back. 

Contingencies are an important way to protect your interests, but you need to be smart in how you use them.

3. Inspection contingency. It’s always recommended that you have a professional inspector inspect your future property before you buy it. An appraiser won’t look at the physical condition of the home; they’re just evaluating it on the lender’s behalf for underwriting purposes. An inspector, on the other hand, will check the mechanical systems, structural elements, etc., and identify anything that needs to be replaced or repaired. You might be able to use the items they find in their report as part of your negotiating strategy.


The contract might stipulate that any necessary repairs must be made by the seller, or you could renegotiate based on the inspector’s findings. In this market, you may consider not asking for any repairs in your contract to improve your offer. 4. Financing contingency (aka mortgage contingency). This gives you the time you need to obtain financing to purchase the home. If you can’t obtain financing within the time frame specified, you can terminate or extend the contract. Otherwise, the contingency is automatically waived and you have to buy the property without the loan. In those cases, you may not be able to get your earnest money back. Contingencies are an important way to protect your interests, but you need to be smart in how you use them. Including too many contingencies in your offer will cause it to be rejected. In a competitive market like this, sellers typically won’t want to deal with a laundry list of contingencies. If you can’t raise the price of your offer to make it competitive, you can eliminate contingencies. As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to us. We’re happy to help.

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