March 9, 2025

Hey Real Estate Readers,

Last time, we talked about different real estate listing statuses—what they mean and how they impact your buying or selling journey. If you caught that post (and if not, go check it out!), you might remember seeing the word contingent pop up a lot.

Contingencies are basically the “if this, then that” clauses in a real estate contract. They protect both buyers and sellers by setting conditions that must be met before the deal is finalized. If a contingency isn’t satisfied, the buyer can typically walk away—sometimes with their earnest money, sometimes without.

So, let’s break down the different types of contingencies and how they impact the home sale process.

Financing Contingency: Show Me the Money

Buying a home is a big deal, and most buyers need a mortgage to make it happen. The financing contingency (aka mortgage contingency) gives buyers time to secure their loan. If they can’t get approved, they can back out without penalty.

🔹 Why it matters: It protects buyers from being forced into a purchase they can’t afford.
🔹 For sellers: A buyer with a pre-approval letter (not just pre-qualification) is less risky.

Appraisal Contingency: What’s It Worth?

Lenders want to make sure the home is worth what the buyer is paying. That’s where the appraisal contingency comes in. If the home appraises for less than the agreed-upon price, the buyer can:

✅ Renegotiate with the seller
✅ Cover the difference in cash
✅ Walk away from the deal

🔹 Why it matters: No lender wants to loan more than a home is worth.
🔹 For sellers: Pricing your home correctly from the start can help avoid appraisal issues.

Home Inspection Contingency: What’s Hiding in the Walls?

Nobody wants to buy a money pit. The home inspection contingency allows buyers to hire a professional inspector to check for issues like:

✔️ Roof damage
✔️ Plumbing leaks
✔️ Electrical hazards
✔️ Structural problems

If the inspector finds major issues, the buyer can:

🔹 Request repairs
🔹 Negotiate a lower price
🔹 Walk away if the problems are too big

🔹 Why it matters: No one likes surprises—especially expensive ones.
🔹 For sellers: Pre-listing inspections can help you avoid deal-breaking issues.

Home Sale Contingency: Waiting for the Domino Effect

Many buyers need to sell their current home before buying a new one. The home sale contingency lets them back out if their existing home doesn’t sell in time.

🔹 Why it matters: Buying a new home while selling the old one is tricky!
🔹 For sellers: This adds uncertainty, but a kick-out clause allows you to keep the listing active in case a better offer comes along.

Title Contingency: Making Sure the Home is Really Theirs to Sell

A title contingency ensures the home has a clear title—meaning no legal claims, liens, or disputes. If issues arise, the buyer can back out.

🔹 Why it matters: Title problems can delay or derail a sale.
🔹 For sellers: Working with a title company early can prevent last-minute surprises.

Insurance Contingency: Can You Get Coverage?

Some homes—especially those in high-risk areas (think flood zones)—may be difficult or expensive to insure. A home insurance contingency ensures the buyer can get a policy before closing.

🔹 Why it matters: Lenders won’t approve a mortgage without proof of insurance.
🔹 For sellers: If your home has known issues (like past claims), be upfront with buyers.

Kick-Out Clause: The Seller’s Backup Plan

This isn’t technically a contingency, but it often goes hand-in-hand with the home sale contingency. A kick-out clause allows a seller to continue showing the home and accept better offers while waiting on the original buyer’s home sale to go through.

🔹 Why it matters: It gives sellers more flexibility.
🔹 For buyers: If you have a home sale contingency, be prepared to act fast if the seller gets another offer.

Final Thoughts

Contingencies protect buyers and sellers, but they also add complexity to the real estate process. The key is understanding which ones are necessary and negotiating smartly to keep your deal on track.

Thinking about buying or selling and want to make sure you’re covered? Let’s chat—book a consultation here.

Your partner in all things real estate,
Ally

Have questions or want to share your experiences? Drop a comment below! ⬇️

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