5 Common Contingencies to Include in a Home Purchase Contract

A loan contingency can be either good or bad. On the one hand, it protects both parties and helps secure the sale for the buyer so they get what they want, how they want it.

But it isn’t exactly the ideal way to sell a home. It opens up a potential exit route for an aspiring buyer, giving them the tools to back out of a sale. This is exactly what a seller doesn’t want if they are trying to, well, sell their home promptly and quickly.

Should I accept a contingent offer on my house? This is a complex question and it depends on a lot of considerations. A house sale contingency is a common practice though, and definitely a viable option for buying (and something you may encounter when selling).

So what are common contingencies included in the purchase agreement? Below we cover the top 5 most likely things you can see, on either end of the closing table.

House inspector inspecting crawlspace

Inspections

The most common real estate contingency clause example is an inspection clause. An inspection clause exists in almost any sale that lacks an as-is clause. In short, the buyer has a certain time period to inspect the home’s condition, usually looking for termite damage, foundation erosion, water damage, mold, fire, and more.

Typically, a buyer will hire an inspection agent. To minimize this as a seller, you can deploy an inspection report (a report you request and pay for prior to the sale). But don’t be alarmed if a buyer requests their own report.

An inspection contingency is usually quite short and can be as quick as three days or, in rare instances, as long as 90.

Appraisal

What contingencies should be put in an offer? Many would agree that a purchase agreement needs an appraisal clause.

An appraisal clause essentially determines the value of the home. Now, a realtor may provide a valuation report based on similar neighboring home sales. But it is entirely possible the financier will request an independent appraisal report. The financier will only approve the loan if the home has a certain value, and they may have an in-house appraiser or a third-party source they use. This is more common when a mortgage is required.

Finances

Speaking of a mortgage, a financial contingency is common. It basically confirms that the buyer won’t buy the home unless they have the money to do so. It is a no-brainer, but when dealing with hundreds of thousands of dollars, it is an imperative clause.

It is rare for a financing contingency to fall through, especially when working with a big bank. They will provide their window of what they will cover. As long as the home doesn’t have extensive damage, it is likely this contingency will not come in to play.

Title

It is entirely possible a home title is “dirty.” It could have due to back taxes, a development freeze, and major and necessary repair need, and more. The city may impose title restrictions that state a home can’t sell until these things are taken care of; hence, a title contingency.

Often known as the “ultimate clause,” a home sale contingency doesn’t require anything more than a gut feeling. In short, a buyer can wait until their current home sells before they close on the other. This puts the seller at risk, having removed their home from the market in hopes of a final sale. The buyer can even get their deposit back. This weakens the offer considerably and it is not commonly used anymore for this reason.

Can I put a bid or offer on a house that is already contingent? You definitely can, especially if your offer is better than the current contingent offer. If the previous offer has a contingent like the above, this could be a good opportunity to jump in there.

So do sellers accept contingent offers? Of course! A contingent offer is a show of respect to many because it shows that the seller has little to hide and the buyer is fully allowed to review their home purchase. It is a big buy, after all.