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Understanding Contingencies

Contingencies are clauses in an offer that define a condition or action that must be met for the purchase contract to become legally binding.  

Typical contingencies buyers use in offers include:

  • Inspection Contingency - Allows the buyer to have a professional home inspector inspect the property and then decide whether they want to move forward with the purchase, potentially renegotiate the price/terms, or back out and have their offer deposit refunded.  This contingency deadline is usually within a week from the time the offer is accepted.

  • Financing Contingency - This gives the buyer time to apply for and receive a mortgage commitment from a lender.  It protects the buyer by allowing the buyer to cancel the offer and get a full refund of their deposit if the lender denies them financing.  This contingency deadline is usually about 30 days from the offer acceptance date. Still, it frequently needs to be extended if the bank doesn’t have all the necessary information to issue a mortgage commitment or denial letter.

  • Appraisal Contingency - In addition to the financing contingency, the appraisal contingency protects the buyer in the case where the property does not appraise at or above the offer purchase price.  The buyer then has the option of canceling the offer and getting their deposit back.

  • Satisfactory Condo Document Review Contingency - This contingency allows the buyer to review the condo documents and financial statements of the condo association.  After review, they then have the option to continue moving forward with the transaction or backing out and getting their deposit back.  This contingency deadline is generally the same as the purchase and sale signing (approximately 10-14 days from offer acceptance.

  • Home Sale Contingency - When buyers know they can’t afford to own both homes simultaneously, this contingency gives them time to sell their current home before closing on the new one.  The deadline for this contingency is sometimes very close to the closing date.

From a buyer’s perspective, all of these probably seem like things you’d want to include in any offers you make. Still, you have to understand that sellers typically consider offers containing contingencies protecting a buyer as weaker and are less likely to accept them.