Most Common Home Contingencies [Infographic]

Home contingencies can make all the difference in a real estate transaction. A contingency means the seller has accepted an offer on the property, but success of the sale may still depend on certain clauses. These clauses usually fall under three categories: passing a home inspection, securing financing, and the legal ownership of the property. Contract contingencies are often called “a buyer’s best friend,” but there are a few contingencies that help protect the seller as well.

In today’s infographic, we take a look at the most common home contingencies you’ll see in a real estate contract.


Inspection Contingencies

Home inspections are the most common home contingency. Basically, a buyer is freed from their offer contract if the home can’t pass an inspection.

  • First, buyers get to choose the home inspectors. There may be a few different inspectors necessary. For example, the pest inspection is different from the home inspection itself. The buyer (/buying agent) have power to decide who checks these things.
  • It’s smart to include a disclosure contingency. If you move in and find the seller didn’t disclose a pre-existing contingency, it can free you from your contract.
  • If anything doesn’t pass inspection, or if it just isn’t up to the buyer’s standards, s/he can demand repairs.
  • The general home condition can be a contingency. Even if it passes inspection, you may know it needs a fresh coat of paint. The buyer can demand that service, or take off the cost of painting from the price of the home.

Financing Contingencies

No one wants to make (or sell) a big investment if they’re not financially ready. More importantly, sometimes their finances really shouldn’t allow a major transition. Financing clauses protect buyers and sellers from getting ripped off.

  • In a buyer’s market, the buyer may include a contingency that the purchase of the home is dependant upon him/her being able to sell the current residence.
  • The buyer can clarify that the purchase is based upon them being able to secure an acceptable mortgage rate.
  • In a seller’s market, the seller can include a contingency that the purchase of the home is only possibly if they find and secure their next residence.
  • Sometimes a certain amount has to be covered in the down payment. The seller has the right to demand something higher than 20%.
  • The seller can (and absolutely will) retract the offer acceptance if the buyer’s loan isn’t approved. Usually this does not need to happen because the buyer has to be pre-approved.

Ownership Contingencies

Believe it or not, there are a lot of ways ownership of a property can be disputed. The last thing any buyer wants is to make a massive down payment and then learn it was all a scam.

  • Sale of the property depends on buyer’s ability to find homeowner’s insurance.
  • Seller can prove full ownership over the property.
  • The buyer chooses the title company.