Home Buying Contingencies Explained: Every Clause You Need to Understand Before Signing

A contingency is a condition in your purchase contract that must be met before the sale is finalized. If the condition isn't met, you can walk away from the deal — usually with your earnest money deposit intact.

Think of contingencies as exit doors. Each one gives you a way out if something goes wrong between your accepted offer and the closing table. Remove a contingency, and you close that exit door. What's left might be a wall.

Understanding which contingencies exist, what they protect, and when it makes sense to modify or waive them is one of the most important parts of the home buying process.

The 7 Most Common Contingencies

1. Inspection Contingency

What it does: Gives you the right to hire a professional home inspector to examine the property and negotiate repairs, credits, or cancellation based on the findings.

Typical timeline: 7–14 days from mutual acceptance.

How it works:

1. You hire a licensed home inspector (typically $300–$600 for a standard single-family home).
2. The inspector examines the structure, roof, plumbing, electrical, HVAC, foundation, and other major systems.
3. You receive a detailed report, often 30–50 pages with photos.
4. Based on the findings, you can:
   • Accept the property as-is
   • Request the seller make specific repairs
   • Ask for a price reduction or closing cost credit
   • Cancel the contract

What inspectors typically check:

• Roof condition and estimated remaining life
• Foundation and structural integrity
• Plumbing systems (supply and drainage)
• Electrical systems (panel, wiring, outlets)
• HVAC (heating, ventilation, air conditioning)
• Water heater age and condition
• Windows and doors
• Attic insulation and ventilation
• Signs of water damage, mold, or pest infestation
• Grading and drainage around the foundation

What inspectors typically DON'T check:

• Behind walls (unless damage is visible)
• Sewer line condition (requires a separate scope, usually $150–$300)
• Well water quality (separate test, $100–$300)
• Septic system (separate inspection, $300–$600)
• Radon levels (separate test, $150–$250)
• Mold testing (separate test, $300–$600)
• Termite/pest inspection (sometimes included, often separate at $75–$150)

Should you waive it? This is one of the riskier contingencies to waive. A home is likely the most expensive thing you'll ever buy. Even newer homes can have significant hidden issues. If you must waive it in a competitive market, consider getting a pre-inspection before making your offer.

2. Financing Contingency (Mortgage Contingency)

What it does: Protects you if your mortgage loan falls through. If you can't secure financing under the terms specified in the contract, you can cancel and get your earnest money back.

Typical timeline: 21–30 days from mutual acceptance.

How it works:

1. After your offer is accepted, you formally apply for your mortgage (if you haven't already through preapproval).
2. The lender processes your application, orders the appraisal, and begins underwriting.
3. If the loan is approved, great — the contingency is satisfied.
4. If the loan is denied or can't be approved under the agreed terms (loan type, interest rate, etc.), you can cancel.

Common reasons financing falls through:

• Job loss or change during the process
• New debt taken on after preapproval (buying a car, opening credit cards)
• Undisclosed debts discovered during underwriting
• Property doesn't meet lender requirements (condition issues, zoning)
• Appraisal comes in low (which may be covered by a separate appraisal contingency)
• Interest rates rise significantly, changing your qualifying ratios

Should you waive it? Only if you can genuinely afford to buy the home with cash if your loan is denied. Waiving the financing contingency means you're on the hook for the purchase price regardless. If you can't close, you forfeit your earnest money and could face a lawsuit.

3. Appraisal Contingency

What it does: Protects you if the home appraises for less than your offer price. Since lenders base loan amounts on the appraised value (not the contract price), a low appraisal creates a gap you'd need to cover in cash.

Typical timeline: The appraisal is usually ordered within 1–3 days of the accepted offer and completed within 1–2 weeks.

How it works:

1. Your lender orders an appraisal from a licensed, independent appraiser.
2. The appraiser visits the property, evaluates its condition, and compares it to recent comparable sales.
3. The appraiser submits a report with their opinion of value.
4. If the appraisal meets or exceeds your offer price, the contingency is satisfied.
5. If it comes in low, you have options:
   • Negotiate a lower price with the seller
   • Pay the difference in cash
   • Challenge the appraisal (request a reconsideration of value or a second appraisal)
   • Cancel the contract

Appraisal gap example:

• Offer price: $450,000
• Appraised value: $425,000
• Gap: $25,000
• Lender will only loan based on $425,000
• Without an appraisal contingency, you'd need $25,000 extra in cash (on top of your down payment) or you'd have to close at the higher price by increasing your down payment.

Should you waive it? In competitive markets, waiving or modifying the appraisal contingency is common. Many buyers offer "[appraisal gap coverage](/blog/how-to-make-competitive-offer)" — committing to cover a gap up to a specific dollar amount. Full waiver means you'll pay whatever you offered regardless of appraisal, so make sure you have the cash.

4. Title Contingency

What it does: Gives you the right to review the title report and cancel if there are unresolvable title issues. A title search examines public records to confirm the seller legally owns the property and that there are no liens, encumbrances, or claims against it.

Typical timeline: 10–14 days, though the title search usually begins immediately after the offer is accepted.

Issues a title search might uncover:

• Unpaid property taxes
• Mechanic's liens (from unpaid contractors)
• Judgment liens (from court judgments against the owner)
• HOA liens (from unpaid homeowner association dues)
• Mortgage liens (existing mortgages that haven't been paid off)
• Easements (rights others have to use part of the property)
• Boundary disputes
• Errors in public records
• Undisclosed heirs with potential ownership claims
• Forgery or fraud in the chain of title

Should you waive it? Almost never. Title issues can make the property unsellable, subject to foreclosure by lienholders, or legally contested by other claimants. Title insurance (which your lender will require) provides some protection, but having the contingency lets you walk away cleanly from a property with serious title problems.

5. Home Sale Contingency

What it does: Makes your purchase conditional on selling your current home first. If you can't sell your existing property by a specific date, you can cancel the purchase.

Typical timeline: 30–60 days, sometimes longer.

How it works:

There are two common versions:

• Sale contingency: Your home must sell AND close before the purchase goes through. This gives you maximum protection but is the weakest offer type.
• Settlement contingency: Your home is already under contract, and the purchase is contingent on that sale closing. This is stronger because the risk of your sale falling through is lower.

The kick-out clause: Most sellers who accept a home sale contingency will insist on a "kick-out" clause (also called a "bump" clause). This allows the seller to continue marketing the home. If they receive another offer, you get a specified period (usually 24–72 hours) to either remove your home sale contingency or step aside.

Should you include it? In competitive markets, a home sale contingency is often a deal-killer. Sellers view it as too risky and uncertain. If possible, explore bridge loans, HELOCs, or selling your current home before making an offer on a new one.

6. HOA Contingency

What it does: Gives you time to review the homeowner association's governing documents, financial statements, meeting minutes, rules, and any pending litigation before committing to the purchase.

Typical timeline: 3–10 days to review documents.

What to look for in HOA documents:

• Monthly/quarterly dues and how frequently they've increased
• Reserve fund balance — a healthy HOA typically has reserves equal to 25–70% of its annual budget. Low reserves mean special assessments are likely.
• Special assessments — has the HOA levied any recently? Are any planned?
• Pending litigation — lawsuits against the HOA can signal serious problems and may lead to special assessments
• Rules and restrictions — pet policies, rental restrictions, parking rules, exterior modification guidelines
• Insurance coverage — what does the HOA's master policy cover vs. what you need individual coverage for?
• CC&Rs (Covenants, Conditions & Restrictions) — the master rules governing what you can and can't do with your property

Should you waive it? Not if you're buying in an HOA community. An HOA with depleted reserves, pending litigation, or restrictive rules can dramatically affect your costs, lifestyle, and resale value.

7. Insurance Contingency

What it does: Makes the purchase conditional on your ability to obtain adequate homeowner's insurance at a reasonable cost.

Why it matters: In some areas — particularly those prone to wildfires, hurricanes, flooding, or sinkholes — homeowner's insurance can be extremely expensive or difficult to obtain. In parts of [California](/blog/california-heloc-guide), Florida, and Louisiana, major insurers have stopped writing new policies entirely, forcing buyers into state-backed insurers of last resort with higher premiums and less coverage.

Typical timeline: 7–14 days.

When this contingency is critical:

• Properties in high-risk fire zones (California, Colorado, etc.)
• Coastal properties in hurricane-prone areas (Florida, Gulf Coast, Carolinas)
• Flood zone properties requiring separate [flood insurance](/blog/hurricane-insurance-guide)
• Older homes with outdated electrical, plumbing, or roofing that insurers won't cover
• Properties with claims history (multiple prior claims can make a property uninsurable through standard carriers)

Should you waive it? Only if you've already confirmed you can obtain affordable insurance. Getting insurance quotes before making your offer is smart practice in high-risk areas.

Less Common But Important Contingencies

Radon Testing Contingency

Radon is a naturally occurring radioactive gas that seeps into homes through the foundation. It's the second leading cause of lung cancer in the United States. The EPA recommends mitigation when radon levels exceed 4 picocuries per liter (pCi/L).

Radon testing typically costs $150–$250 and takes 2–7 days. If levels are high, mitigation systems cost $800–$2,500 to install and are highly effective.

Well and Septic Contingency

If the property uses a private well and/or septic system rather than municipal water and sewer, this contingency lets you test both systems:

• Well testing: Water quality (bacteria, nitrates, arsenic, lead, etc.) and flow rate
• Septic inspection: Tank condition, drain field function, and remaining system life

Failing septic systems can cost $15,000–$30,000+ to replace. Well problems can be equally expensive. Don't skip this contingency for properties with private systems.

Zoning/Permit Contingency

This contingency lets you verify that the property's current use (and any planned modifications) comply with local zoning laws, and that all improvements were properly permitted. Unpermitted additions or modifications can create insurance, liability, and resale problems.

Contingency Timelines: A Visual Guide

Here's how contingencies typically play out over a 30-day escrow:

Days 1–3: Escrow opens. Title search ordered. Appraisal ordered.

Days 1–7: Inspection period. Home inspector, sewer scope, radon test, termite inspection.

Days 3–10: HOA document review. Insurance quotes obtained.

Days 5–10: Inspection negotiations. Request for repairs or credits submitted.

Days 7–14: Title report received and reviewed. Title issues (if any) identified and addressed.

Days 10–21: Appraisal completed. Results reviewed.

Days 14–25: Loan underwriting. Final loan approval.

Days 25–30: Final walk-through. Closing.

Each contingency has a deadline. Missing a deadline can mean losing your right to cancel under that contingency, so track every date carefully.

The Cost of Waiving Contingencies

Here's what you're risking with each waiver, expressed in potential financial exposure:

These aren't hypothetical numbers. They're based on real scenarios buyers face regularly.

How to Handle Contingency Negotiations

The Inspection Negotiation

After your inspection, you'll likely have a list of findings. Not everything warrants a repair request. Focus on:

Request repairs for:

• Safety hazards (faulty wiring, gas leaks, missing handrails)
• Structural issues (foundation cracks, roof damage, water intrusion)
• Major system failures (non-functioning HVAC, plumbing leaks)
• Code violations that affect safety or insurability

Don't request repairs for:

• Cosmetic issues (paint, carpet, minor drywall damage)
• Normal wear and tear
• Minor maintenance items you'd handle yourself
• Personal preferences (you don't like the faucets)

Pro tip: Instead of asking the seller to make repairs (where they'll hire the cheapest [contractor](/blog/diy-vs-contractor)), ask for a credit at closing so you can hire your own contractor and control the quality of work.

Removing Contingencies

When you're satisfied that a contingency has been met, you'll sign a contingency removal form. This is a significant step — once removed, you can no longer use that contingency as an exit.

In some states, contingencies are "active" (you must actively remove them) and in others they're "passive" (they expire automatically if you don't object by the deadline). Know which system your state uses.

State-by-State Variations

Contingency practices vary significantly by state:

• California: Uses a standardized timeline with 17-day defaults for inspection and loan contingencies. Contingencies are active — buyers must explicitly remove them.
• New York: Attorney review is standard and effectively acts as a broad contingency during the first few days after contract signing.
• Texas: Uses an option period (typically 7–10 days, for a fee of $100–$500) that gives the buyer unrestricted right to cancel for any reason.
• Florida: Inspection periods are typically 10–15 days with an "as-is" contract option that's common but still allows cancellation.

Work with a local [real estate attorney](/blog/how-to-build-real-estate-team) or experienced agent who understands your state's specific contingency framework.

Frequently Asked Questions

Can I add contingencies that aren't on the standard form?

Yes. Purchase agreements can include custom contingencies for virtually anything — soil testing, environmental assessments, neighbor interviews, school district verification, etc. Custom contingencies should be written or reviewed by a real estate attorney to ensure they're enforceable.

What happens if I miss a contingency deadline?

It depends on your state and contract language. In some states, missing the deadline means the contingency is automatically waived (passive removal). In others, the seller must send a "notice to perform" demanding you act within a specified period (usually 2–3 days). Either way, missing deadlines weakens your position.

Can the seller reject my repair request?

Absolutely. The seller can accept, reject, counter, or ignore repair requests. If they reject your request and you're still within your inspection contingency period, you can either accept the property as-is or cancel the contract.

How many contingencies are too many?

There's no magic number, but in competitive markets, fewer contingencies make your offer more attractive. The key is keeping the contingencies that protect you from catastrophic risk (inspection, financing, title) while being flexible on less critical ones.

Do contingencies protect the seller too?

Not directly — contingencies primarily protect the buyer. However, the contract itself protects the seller in other ways: the earnest money deposit, the binding nature of the contract once contingencies are removed, and specific performance clauses that may allow the seller to force the buyer to complete the purchase.

Should I get a real estate attorney to review my contingencies?

In some states (like New York, New Jersey, and Massachusetts), attorney involvement in real estate transactions is standard or required. In others, it's optional but recommended — especially for complex deals, unusual contingencies, or first-time buyers. A real estate attorney typically charges $500–$1,500 for contract review, which is minimal compared to the value of the transaction.

The Bottom Line

Contingencies exist to protect you from buying a house that's structurally unsound, legally compromised, overvalued, or financially unfeasible. They're not obstacles to the transaction — they're safety nets.

In competitive markets, there's pressure to remove contingencies to make your offer more attractive. Sometimes that's a reasonable trade-off. But always understand exactly what you're giving up, quantify the financial risk, and never waive a contingency just because someone else is.

The goal isn't to make the strongest possible offer. It's to make the strongest offer that still protects you from the risks you can't afford to take.

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