By Deborah Read Fowler
If you're planning to buy or sell a home, you’ll likely come across the term real estate contingencies. These clauses play a big role in protecting both parties during a transaction, but they can also cause confusion if you’re not sure how they work. I’ve helped many clients navigate contingencies successfully, and with the right strategy, they don’t have to derail your sale or purchase. Here's a straightforward guide to what contingencies mean, when they matter, and how to handle them wisely.
Key Takeaways
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Contingencies spell out specific conditions that must be satisfied before closing
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Inspection, appraisal, financing, and home-sale contingencies are the most common
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The way contingencies are structured can strengthen or weaken an offer
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Both buyers and sellers need to understand timelines, risks, and negotiation leverage
What Exactly Is a Real Estate Contingency?
A real estate contingency is a clearly defined condition written into the contract. If that condition isn’t met within the agreed timeline, the buyer can usually terminate the contract and recover their earnest money.
Common Contingencies Explained
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Inspection contingency gives buyers a set number of days (often 7–10) to complete inspections and request repairs, credits, or termination
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Appraisal contingency allows buyers to renegotiate or walk away if the home appraises below the purchase price
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Financing contingency protects buyers if their loan is denied despite a good-faith effort to secure financing
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Home sale contingency ties the purchase to the successful sale of the buyer’s existing home
Why Contingencies Matter
Our housing stock includes older homes, custom builds, and properties on larger lots, which makes contingencies especially important (but also more nuanced).
How Contingencies Show Up Locally
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Inspection contingencies are critical for older homes, especially those with original plumbing, septic systems, or dated electrical panels
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Appraisal gaps occur when buyers compete for limited inventory, particularly in the $1M–$1.5M range
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Cash buyers often limit contingencies to inspections only, which can make their offers more attractive
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Buyers relocating from Boulder or Longmont may include a home-sale contingency if their current home hasn’t closed yet
How Buyers Can Use Contingencies Strategically
Contingencies should protect you, but not scare off sellers. The goal is to balance risk management with competitiveness.
Buyer Strategies That Actually Work
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Shorten inspection timelines (for example, 5–7 days instead of 10) to show seriousness
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Request inspection concessions only for major items, such as roof lifespan, HVAC condition, or structural issues
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Include a defined appraisal gap amount, such as agreeing to cover the first $25,000 if the appraisal comes in low
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Provide lender documentation, showing income and assets have already been reviewed, not just a basic pre-approval
What Sellers Should Watch For
Not all contingencies carry the same risk. Sellers should look beyond the purchase price and evaluate how likely the deal is to close.
How Sellers Can Evaluate Risk
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Check whether the buyer’s lender has fully underwritten the loan or is still early in the process
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Review inspection language carefully, watching for vague wording that allows broad termination rights
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Ask how appraisal shortfalls will be handled, especially if the price is above recent comparable sales
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If a home-sale contingency is included, confirm whether the buyer’s home is already under contract and the expected closing date
FAQs
Can I back out of a contract because of a contingency?
Yes. If the contingency is not satisfied within the contract deadline, buyers can usually terminate without losing earnest money.
Should I waive contingencies in a competitive market?
Sometimes, but only with careful consideration. Waiving inspection or appraisal protections can increase risk, especially with older homes. I help clients weigh that risk before deciding.
Are contingencies negotiable?
Absolutely. Timelines, scope, and terms can all be adjusted during offer negotiations to better protect your interests.
Contact Me Today
Real estate contingencies don’t have to feel intimidating or confusing; when you understand them, they become powerful tools. Whether you’re buying or selling, I’ll help you structure contingencies that protect you without putting the deal at risk.
Reach out to me, Deborah Read Fowler. I’m always happy to walk you through the details and help you move forward with clarity and confidence.
Reach out to me, Deborah Read Fowler. I’m always happy to walk you through the details and help you move forward with clarity and confidence.
