Real Estate Explained: Unpacking the all important list of contingencies in real estate (DC Metro Region)

Here is my list of the various contingencies a homebuyer should consider when writing an offer for a home purchase. I liken a contingency to insurance — it provides the buyer with protection for a specified period of time following ratification/offer acceptance. If something specific to that contingency is discovered, the purchaser will have the opportunity to withdraw from the underlying contract without penalty. Be sure to discuss the timelines for these contingencies with me or your agent/representative. Keep in mind that contingencies can be withheld or removed during negotiation, if and when the situation warrants or makes sense.


Home Inspection Contingency


This contingency allows the buyer to conduct a professional home inspection within a specified timeframe, typically 5 to 7 days post contract acceptance/ratification. In the DC metro area where I operate, there are two options, an inspection with a ‘right to negotiate’ which affords the buyer the opportunity to negotiate repairs, ask for a credit or withdraw completely, or the more seller friendly ‘right to cancel’ which technically precludes the buyer from any right to negotiate. However, in a non-competitive scenario, the seller may decide to negotiate rather than have the buyer walk.  


Appraisal Contingency


This contingency requires the property to appraise for the agreed upon purchase price or more. If the property appraises for less, the buyer may request that the seller lower the price to match the appraisal value or renegotiate other terms of the contract. If there is no appraisal contingency the buyer will need to come up with the cash to make up the difference. If the buyer can do that within reason, then I recommend not going with one because in context it will appear that the buyer is giving up something. Since appraisals are also tied to a financial contingency (see below), appraisal contingencies make more sense for cash buyers.


Financing Contingency


This contingency protects the buyer by making the purchase contingent on securing financing. If the buyer is unable to obtain a mortgage loan within the specified timeframe or at the agreed-upon terms, they can withdraw from the contract without penalty. In competitive scenarios I have been able to waive this contingency without a problem but it’s important to check with your lender/loan specialist as far as the buyer’s ability to satisfy the loan while also paying attention to valuation/the asking price.


Sale Contingency


If the buyer needs to sell their current home before purchasing the new one, they may include a sale contingency. This allows the buyer to withdraw from the contract if they are unable to sell their existing property within a specified timeframe. While these contingencies do happen from time to time, they are most often accepted in a non-competitive scenario since they can, depending in the circumstances, be difficult to meet.


Home Sale Contingency


Conversely, if the seller has to find a new home before completing the sale, they may include a home sale contingency. This allows the seller to cancel the contract if they are unable to find a suitable replacement property within a specified timeframe.


Thank you for reading and please feel free to hit the like button and or make a comment/ask questions. 


Happy hunting! 




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