When buying or selling a home, contingencies serve as built-in protections that ensure both parties meet certain conditions before finalizing the transaction. These safeguards help prevent unexpected surprises and allow for renegotiation or cancellation if necessary. Here’s what you need to know about the most common contingencies in real estate.
Financing & Appraisal Contingencies
- Loan Contingency: Buyers typically include a loan contingency to ensure they can secure financing for the home purchase. If they are unable to obtain a loan within the specified timeframe, they may have the right to withdraw from the contract.
- Appraisal Contingency: Lenders require an appraisal to confirm the home’s value. If the property appraises for less than the agreed-upon price, the buyer may negotiate a lower price, cover the difference, or opt to cancel the deal.
Home Inspection Contingency
A home inspection contingency allows the buyer to conduct a detailed inspection of the property. In addition to a general home inspection, buyers can request specialized evaluations, such as:
✔ Termite and pest inspections
✔ Roof, pool, or solar assessments
✔ Foundation, septic, and sewer evaluations
✔ Fire hazard and defensible space inspections
If any significant issues are found, the buyer can negotiate repairs, request a price adjustment, or even back out of the deal if necessary.
Review of Seller Disclosures & Property Documents
Buyers are given time to review important documents, such as:
📑 Seller disclosures outlining known issues with the home
📑 Preliminary title reports verifying ownership and any liens
📑 HOA documents (if applicable) detailing community rules and fees
📑 Escrow paperwork to ensure a smooth closing process
This step allows buyers to make an informed decision about the purchase and avoid surprises after closing.
Home Sale Contingency
In some cases, a buyer’s ability to move forward depends on selling their current home first. A home sale contingency provides them with a set period to complete the sale of their existing property before committing to the new one.
On the flip side, sellers may request a contingency to secure a replacement home before finalizing the sale of their current property.
Insurance Contingency
Homeowners insurance is essential, but in certain areas, securing coverage can be challenging due to wildfire risk, flood zones, or other factors. An insurance contingency allows buyers to research insurance costs and availability before fully committing to the purchase.
Informational Access
Even after an offer is accepted, buyers often need access to the home before closing for planning purposes. This may include bringing in contractors, taking measurements, or assessing design options for future renovations. The purchase contract allows for a specified period of time that allows the buyer informational access to the home.
Why Contingencies Matter
Contingencies help protect both buyers and sellers by ensuring that key conditions are met before a deal is finalized. Whether you’re purchasing or selling a home, having the right contingencies in place can provide peace of mind and a smoother transaction.
Ready to Buy or Sell? Let’s Talk!
If you have questions about contingencies or want expert guidance on your next real estate move, contact the Coastal Luxe Properties team today!