As a home seller, contingencies in real estate introduce a frustrating level of uncertainty and risk into your transaction. Each clause is a potential exit for your buyer, which can lead to stressful delays, last-minute renegotiations, or the entire sale falling through. Having a deal collapse forces you to relist your home, losing valuable time and market momentum. In this post, we take a closer look at what contingencies are standard and which ones to challenge (and when).
A real estate contingency is a clause in a purchase agreement that specifies a condition that must be met for the contract to remain in force. For buyers, these clauses act as a safety net, allowing them to back out of a deal without penalty if issues like a low appraisal, failed financing, or major inspection problems arise. As a seller, you should anticipate these common requests and be prepared to negotiate their specific terms. Let’s take a look at the five most common contingencies in real estate that impact home sellers. The inspection contingency allows the buyer a set period to have the home professionally inspected. Based on the inspector’s report, the buyer can request repairs, ask for credits, or terminate the contract if significant issues are discovered. This is one of the most common and often heavily negotiated contingencies. An appraisal contingency protects the buyer if the home’s appraised value comes in lower than the agreed-upon sale price. Since a lender won’t finance a home for more than it is worth, this clause gives the buyer the ability to renegotiate the price or walk away if an “appraisal gap” exists. This contingency, also known as a mortgage contingency, gives the buyer an out if they are unable to secure a mortgage to purchase the home. Even with pre-approval, a buyer’s loan can be denied for various reasons. This is a standard clause that protects the buyer’s earnest money if their financing falls through. A home sale contingency makes the purchase of your home dependent on the buyer successfully selling their own property. This is a particularly risky clause for sellers, as it ties your transaction to the success of another sale over which you have no control. The title contingency is a standard clause that ensures the property title is free of liens or ownership disputes before the sale is finalized. A title search confirms you have the legal right to sell the property, protecting the buyer from future legal challenges. This is generally non-negotiable protection for all parties. As a home seller, the strategy you use to negotiate contingencies depends on market conditions. Your leverage to resist or modify a buyer’s requests is directly tied to local supply and demand. Below is a snapshot of the markets you may encounter and what you can expect. In a seller’s market, you have significant leverage due to high demand and low inventory. This is the best time to push back on non-essential requests or counter with shorter contingency periods. Buyers may even waive certain contingencies to make their offers more competitive. In a balanced market, a give-and-take approach is necessary. You will likely need to accept standard contingencies, but you can stand firm on requests for extensive repairs or unusually long timelines. The goal is to find a fair middle ground in your negotiations. In a buyer’s market, you’ll need to be more flexible. Buyers have more options, so you have less leverage. Being accommodating of reasonable requests is key to securing a buyer and keeping a deal together. While some buyers in hot markets may waive protections, this is far less common when conditions cool. Your most valuable resource is a top local agent who understands the specific dynamics of your market and can advise on the most effective ways to negotiate or tighten contingency terms. With market context in mind, let’s look at how sellers can handle specific contingencies, starting with inspections.What contingencies in real estate impact sellers?
Inspection contingency
Appraisal contingency
Financing contingency
Home sale contingency
Title contingency
When to push back on contingencies based on market conditions
Hot (seller’s) market
Balanced market
Cool (buyer’s) market
