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What are real estate contingencies?

Buying a home is a major investment, one that requires lots of foresight and planning. Once you find a suitable property and enter into negotiations with the seller, you must consider real estate contingencies.

Contingencies are clauses in the real estate contract that permit the buyer to walk away from the transaction if certain conditions are not met. They also ensure you receive a refund on your earnest money deposit. Here are a few common contingencies and how they benefit buyers.


A home inspection evaluates important property components, such as roofing, foundation, plumbing, HVAC systems, and electrical wiring. In the event the inspection discovers issues, this contingency can provide a few different options. You can request the seller makes repairs before the transaction goes through. You can also ask them to reduce the selling price to offset the cost for repairs you will make once you assume ownership of the property.


As an investment, the home you purchase must possess the value advertised by the seller. When it does not, your lender may choose to pull funding due to the disparity. An appraisal contingency provides the option to cancel the contract if an appraisal returns different results than the property’s stated value.


While you should always get pre-approved for funding, including a mortgage contingency in the contract is an added layer of protection. If there is an issue with the loan, and you cannot secure proper funding, this clause allows you to terminate the contract without legal reprisal. Funding issues are quite common and can occur even when you have received approval, so mortgage contingencies are a good addition.

Never agree to a real estate contract that you are not comfortable with. If the seller is unreasonable, or you cannot see eye to eye, you may need to walk away from the deal completely.



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