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In and About Real Estate

Please Explain: What's a Contingency?


If you're a newcomer to the world of real estate, you may encounter some unfamiliar terms that can be a bit confusing. Real estate terminology has its own learning curve, and it's essential to grasp these concepts to feel confident during the purchase or sale of a home.

One such crucial term is "contingency," so let's dive right in.

Simply put, a contingency is a condition that must be met before a real estate contract becomes binding. If the contingency is not met, the buyer or seller can back out of the deal without penalty, such as losing a deposit.


There are many different types of contingencies, but some of the most common you’ll find in real estate include:


Financing contingency: This contingency allows the buyer to back out of the deal if they are unable to obtain financing for the purchase. Most purchase contracts in our area include pre-approvals for loans, but it’s important to remember that a pre-approval is not necessarily a slam dunk for a home loan.


Appraisal contingency: This contingency allows the buyer to back out of the deal if the appraised value of the property is lower than the purchase price. Of course, in this instance, the buyer and seller may renegotiate terms to keep the contract viable.


Home inspection contingency: This contingency allows the buyer to back out of the deal if the home inspection reveals any major problems. The buyer and seller can negotiate payment or repair of necessary items and keep the contract moving forward.


Sale of buyer's current home contingency: This contingency allows the buyer to back out of the deal if they are unable to sell their current home before closing on the new home. It can also allow a seller to cancel a contract after a set period to consider another offer on the property.


Contingency clauses are important for the protection of both buyers and sellers. They protect buyers by giving them an out if something goes wrong with the property, and they protect sellers by giving them an out if they are unable to find a buyer for their current home.



Sometimes releasing certain contingencies when submitting an offer increases a buyer’s chances of getting the home in a competitive setting. It’s vital to listen carefully to your realtor’s advice before proceeding with an offer with no contingencies.


We are here to help both buyers and sellers find success in the real estate market. We know Sonoma County like the back of our hand! We live here, we work here, and we are dedicated to your success! We want to make sure the you understand each step in the process.


Ready to learn more? Call Trish today! 707.636.4215

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