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Home Contingencies to Consider Before You Buy

In an ideal world, the homebuying process is simple. You find a house, make an offer, close, and move into your dream home. But buying a home is daunting for a first-time homebuyer. And once both parties sign the real estate purchase agreement, the deal is final.

Home contingencies are vital to protect against unfavorable circumstances, such as the buyer's failure to get home insurance before the closing date. Many standard home purchase contracts contain conditions that either party must meet before the transaction closes. These conditions are real estate contingencies.

Many homebuyers make contingent offers on their future home. They can leave the purchase agreement if the contingencies aren't met. This reduces some of the risks in buying a home. Think of home contingencies as part of your due diligence as you navigate the housing market.

This article will explore a few common real estate contingencies both parties should consider during the homebuying process.

Types of Home Contingencies

Standard home purchase contracts contain several common contingencies. These include:

  • Securing a home loan or mortgage
  • A clean home inspection
  • Insurance contingency
  • Title contingency

Some types of contingencies are more uncommon and open to dispute. For example, the sellers may condition the sale of their current home. This is a home sale contingency. This means they won't buy the new house if they can't sell their existing home.

The contingent contract should outline the contingency period or the time frame within which both parties must satisfy the contingencies. Failure to meet the contingencies may result in invalidating the contract.

Financing Contingency

Almost all home sale contracts contain a mortgage contingency. Mortgage contingencies require the buyer to secure a home loan from a lender or other source of financing. This contingency may place a period of time between signing and closing to secure this funding.

A mortgage differs from other financial obligations in a home sales purchase agreement, including the down payment or earnest money deposit. These monies are often held in an escrow account until the deal closes.

This contingency does not mean the buyer has no choice but to accept anything the mortgage lender offers. A buyer's financing contingency may include getting an interest rate of a certain amount to complete the purchase.


In a competitive market, most buyers go into the homebuying process with a mortgage preapproval letter. Mortgage lenders will ask for financial information such as past tax returns, income proof, and credit scores.

Many real estate agents and realtors require preapproval before showing you homes. A preapproval letter helps determine how much you can spend on a house. It also shows the real estate professional that you are serious about buying a new home.

Appraisal Contingency

Most real estate contracts also contain an appraisal contingency. A home appraisal protects a buyer from buying an undervalued home. An appraisal also helps confirm that the house price is a fair market value.

The sale contract is voidable if the appraised value is less than the sale price or loan value.

Home Inspection Contingency

Under home inspection contingencies, the buyer has the right to get a home inspection within a specific amount of time. Buyers can select an unbiased home inspector to inspect the property thoroughly. Buyers can either get out of the contract or demand repairs if the buyer is not, in good faith, satisfied with the house's condition.

Insurance Contingency

Many homeowners want to protect their new home through home insurance before moving in. Home insurance companies are increasingly reluctant to insure real property in certain parts of the country. An insurance contingency can help a homebuyer if they can't find an insurer. As with other common contingencies, the buyer can walk away from the real estate deal if they can't get insurance.

Title Contingency

The title contingency is essential for you as the buyer. This contingency allows you to leave the contract if the home seller cannot prove they have legal title to the property. As the buyer, you want an "unencumbered" title to the property free of any liens.

You can ask a reputable title company to complete a title search and prepare a title report. Even if the report is "clean," get title insurance. Title insurance protects the buyer if the title company misses an encumbrance or defect on the title. For example, a title search is unlikely to uncover an adverse possession claim to the property.

Get Help

Buying a home is a complicated financial undertaking. A real estate attorney can help you throughout the process. They can review contingency clauses in the standard purchase agreement or draft a new contract. They can also help you negotiate other contingencies. Before buying a house, speak to a local real estate attorney. They can help you with all of your real estate transactions.

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