Agent's Perspective - Real Estate Contingencies


Understanding contingencies in a real estate transaction is important. It is considered normal for a purchase contract to contain contingencies. 

Two of the most common contingencies are mortgage or finance contingency and property condition contingency. 

A mortgage contingency gives the buyer time to obtain a mortgage commitment by a certain date. It protects the buyers from being denied a loan. A pre-approval letter from your lender is a good first step, but is not a guarantee of a commitment to lend. A loan commitment that the lender gives to a buyer usually has some conditions attached to it. Usually a standard time limit on a loan contingency is 15-20 days in today’s demanding market. Either the buyer is very strong and has a high credit rating and a large down payment, or is going to pay all cash and doesn’t need a mortgage contingency. In today’s competitive market, having an offer with no loan contingency gives a strong edge to that potential purchase.


The other common contingency is the house or property inspection contingency. This gives the buyer time to do inspections on the condition of the property. If the property is not to the satisfaction of the buyer, the buyer can back out of the deal and have all deposit, if any, returned. 

Property inspections can be very comprehensive; pest reports, lead based paint tests, water quality, drainage, and electrical inspections, to name a few, are common. Some sellers have inspections on their property done prior to putting their property “for sale” on the market in order to be able to provide this information to any interested prospective buyer in advance. Potential buyers can provide the seller with “read and approves” on their copies of the reports along with their offer to purchase. This can be very helpful to both parties. An earnest offer can be made after already reviewing a general property condition report in advance. A buyer can still obtain more in depth inspections at their expense, if they have areas of concern. 

These are just two of the most common contingencies. Other common contingencies include verification of funds, and approval of condominium rules and by laws. 

Some buyers need to sell their current home before they are able to purchase a new home. This contingency can sometimes be difficult to get the seller to agree to if it is a seller’s market. Buy accepting this contingency the seller is curtailing being able to consider other offers that may be available to the seller. 

In general, the buyer usually wants contingencies to protect themselves, and the seller wants as few as possible contingencies to feel that the offer they have accepted will actually close escrow. Contingencies can give the buyer a  little “wiggle room” to try and renegotiate or renege on their offer.