Purchase Tips · May 21, 2025
Real Estate Purchase Contingencies Explained: What Every Buyer Needs to Know
Contingencies protect buyers by allowing them to exit a contract under specific circumstances without losing their earnest money. Here is how each one works.
Contingencies are protective clauses in a real estate purchase contract that give the buyer the right to exit the deal under specific circumstances and receive their earnest money back.
Financing Contingency (Mortgage Contingency)
Protects you if you cannot obtain mortgage financing at the terms specified in the contract. If your loan falls through despite good-faith efforts, you can exit the contract and get your earnest money back.
Key detail: The contingency typically specifies a financing deadline. If you cannot obtain approval by that date, you must choose to waive the contingency (risking your earnest money) or exit the contract.
Do not waive your financing contingency unless you are confident you can close — either with a strong pre-approval or alternative financing ready.
Home Inspection Contingency
Gives you the right to have the property inspected and to negotiate repairs or exit the contract based on inspection findings.
Typical period: 7-14 days from contract acceptance. In competitive markets, buyers often shorten this to 5-7 days or perform pre-offer inspections to waive the contingency entirely.
Appraisal Contingency
Protects you if the property appraises below the purchase price. Without an appraisal contingency, if the home appraises low, you must cover the difference in cash or lose your earnest money.
Waiving the appraisal contingency is increasingly common in competitive markets — only do this if you can genuinely cover a potential gap.
Home Sale Contingency
Makes your purchase contingent on selling your current home. Strongly disfavored by sellers in most markets — signals uncertainty and limits their options.
Title Contingency
Usually built into standard contracts — allows exit if title search reveals problems (liens, ownership disputes, encroachments).
HMS works with buyers to structure offers that balance protection and competitiveness. Call 309-222-8286.