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7 FAQs About Real Estate Contingency Clauses

Do you have questions about the closing date and how it affects you as a seller or buyer? Here are seven FAQs about real estate contingency clauses and what you need to know.
Do you have questions about the closing date and how it affects you as a seller or buyer? Here are seven FAQs about real estate contingency clauses and what you need to know.

Real estate contingency clauses are a common aspect of the negotiation process and can help to protect both the buyer and the seller. If a contingency clause is included in your purchase agreement, it is crucial that you understand what it means and how it will affect you.

Working with an experienced real estate agent can help you decide which contingencies you should include in your purchase offer if you're a buyer, or whether to accept an offer with contingencies if you're a seller. Here are seven FAQs about real estate contingency clauses.

What is a contingency in a purchase contract?

A contingency is a way for the home buyer to protect themselves from unforeseen circumstances that may occur during the real estate process. Almost like a "get out of jail free card," a contingency allows the party to back out of the contract if a specific event or circumstance occurs, allowing them to walk away from the deal legally.

Put simply, a real estate contingency is a condition that must be met for all parties to continue with the proposed sale. If all conditions are not met, either party can walk away from the deal and suffer no legal repercussions.

Can you put an offer on a house that is contingent?

Yes, and most real estate agents would recommend that your offer to purchase a home at least includes an inspection contingency. This will help to protect you against any surprises or problems that property may have that you weren't aware of when you made the offer to purchase.

Although buyers are legally allowed to put as many contingencies as they would like in a purchase agreement, note that some sellers may disregard the offer if they feel it is contingent on too many things.

It is prudent always to ask your real estate agent their advice and which contingencies they would recommend that you include.

What are good contingencies to include in an offer on a home?

The most common contingencies to include in an offer include a home inspection contingency, which typically stipulates that if the buyer is not satisfied with the results of the property inspection, they can walk away within the agreed inspection period with their escrow intact.

A home inspection contingency is a wise contingency for all buyers to include when they present a seller with an offer, as it is impossible to predict what issues a home may have without a thorough inspection.

Most real estate agents will insist on protecting their buyers with this contingency.

The second most common contingency is the mortgage financing contingency and the home appraisal contingency, which protect the buyer if their financing falls through at the last minute, or the home does not appraise for the agreed sales price.

If the purchase of a home is dependent on the successful sale of the buyer's current home, they could include a sales contingency that stipulates as such. This provision ensures that if the buyer is unable to sell their current property, they can legally exit the deal on their new home with no repercussions.

This type of contingency is often not popular with sellers and can make an offer appear weaker in comparison to another offer that does not contain this particular contingency.

What are most purchase agreements contingent on?

Most purchase agreements are contingent on aspects that affect the material value of the home. For example, common purchase agreement contingencies are reliant on the inspection going well, the buyers financing being approved, and the home appraising for the agreed sales price.

There are many other contingencies that you can stipulate in a purchase agreement; however, it is wise only to include those that are strictly necessary.

How do you write a contingent offer on a house?

Your real estate agent can advise you on which contingencies are appropriate for your particular situation and the property you are planning to purchase.

You should sit down and discuss your buying situation transparently so that your buyer’s agent can advise you appropriately.

Should I accept a contingent offer on my house?

Yes, if it serves your best interest and you are comfortable with the offer and contingencies presented.

If a buyer presents you with an offer that is contingent on factors other than the inspection period, their financing, or the appraisal, sit down with your real estate agent and discuss the pros and cons of the offer.

Some contingencies are more easily predicted, however, avoid unrealistic contingencies with impossible terms.

What does “sold subject to contingencies” mean on a listing?

If you see a notice on a listing saying that it is “offered for sale subject to contingencies,” this means that the sale must meet certain conditions in order for it to close. The contingencies will usually be specific to the sellers circumstances.

This is a common occurrence in short sales because the seller is not able to agree to a sales contract until their lender agrees to accept the sales price that is being offered.

If you have more questions about contingencies in purchase contracts and how they affect you as a buyer or seller, you should speak to one of our Clever Partner Agents, who are all top-performing professionals in their market. Clever Partner Agents are knowledgeable about the real estate process and can ensure that you are protected during the transaction from start to finish.


Reuven Shechter

Reuven Shechter is the Outreach Coordinator at Clever Real Estate, the free online service that connects you with top real estate agents to help save on commission. He spreads the word about Clever, disseminating studies to journalists and developing relationships with media outlets. Reuven is passionate about investing in real estate and creating lasting success for families. His writing has been featured in Max Real Estate Exposure, Leverage Marketing, and more.

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