If you’ve ever bought or sold a home, you’ve likely heard the word “contingency” tossed around. It might sound like real estate jargon, but contingencies are actually one of the most important parts of the buying and selling process. They’re essentially “safety nets” written into a contract that protect both buyers and sellers, ensuring big decisions aren’t made without some important conditions being met.
What are contingencies?
A contingency is a clause in the purchase agreement that requires certain conditions to be satisfied for the sale to move forward. If those conditions aren’t met, the buyer (and sometimes the seller) can walk away from the contract – usually with their earnest money intact. Think of it as the fine print that keeps the process fair and balanced.
The most common contingencies
- Home inspection contingency: Perhaps the most familiar, this allows the buyer to have the home professionally inspected. If serious issues are uncovered, the buyer can request repairs, negotiate concessions or even back out. For sellers, this means preparing the home as best as possible before listing.
- Financing contingency: Even with the pre-approval, lenders must finalize the loan. This clause protects buyers if their financing falls through. Sellers benefit, too – knowing a buyer’s offer isn’t just based on hope and good intentions.
- Appraisal contingency: Lenders want to ensure the home is worth the agreed price. If the appraisal comes in below contract price, the buyer may have the opportunity to renegotiate or withdraw from the contract.
- Home sale contingency: Some buyers need to sell their current home before the can close on a new one. While this offers them flexibility, it can feel risky for sellers since it ties the deal to another transaction.
Why contingencies matter
For buyers, contingencies provide peace of mind and financial protection during one of the biggest purchases of their lives. For sellers, they can prevent last-minute disputes and create clear expectations. The key is balance: too many contingencies can make an offer less appealing, while waiving them entirely can leave a buyer exposed to unnecessary risk.
Navigating contingencies with confidence
The truth is, contingencies don’t have to derail a sale – they’re simply tools to ensure everyone moves forward with confidence. A skilled Realtor can help buyers craft strong offers that still protect their interests and guide sellers in evaluating which contingencies are reasonable and which may be red flags.
When it comes to real estate, the contract isn’t just about the protections in place that help both sides reach the closing table smoothly and confidently.
Billy Morris
2025 President of the Lynchburg Association of Realtors
Associate Broker at John Stewart Walker Inc.