Selling a home is more than just agreeing on a price — it’s about navigating the terms and conditions that make the sale possible. One of the most important (and sometimes confusing) aspects of a real estate transaction is the contingency.
If you’re preparing to sell — especially if you’re doing it For Sale By Owner (FSBO) — understanding contingencies is essential. These clauses can protect both you and the buyer, but they can also introduce risks, delays, and negotiation challenges if you’re not prepared.
In this guide, we’ll break down what contingencies are, the most common types you’ll encounter, how they affect your sale, and how to handle them confidently.
🏡 What Is a Contingency?
A contingency is a condition written into a purchase agreement that must be met before the sale can be completed. Think of it as an “if this, then that” clause: the buyer agrees to purchase the home if certain conditions are satisfied.
If a contingency isn’t met, the buyer may have the right to back out of the contract without losing their earnest money deposit.
Contingencies are common — in fact, most real estate transactions include at least one. They’re designed to protect buyers (and sometimes sellers) from unforeseen issues. But they also add complexity, so knowing what to expect will help you navigate them like a pro.
📑 Common Contingencies Sellers Should Understand
Not all contingencies are created equal. Here are the ones you’re most likely to encounter and how they can impact your sale:
1. Inspection Contingency
This is one of the most common contingencies in residential real estate. It gives the buyer the right to have the home professionally inspected, typically within 7–14 days after the offer is accepted.
✅ What it means for you:
- If the inspection reveals significant issues (like roof damage, plumbing leaks, or foundation problems), the buyer can request repairs, ask for a price reduction, or walk away.
- Even if you’re selling “as-is,” buyers may still use the inspection to renegotiate terms.
💡 Seller Tip: Consider a pre-listing inspection before putting your home on the market. Identifying and addressing issues ahead of time can reduce surprises and strengthen your negotiation position.
2. Financing (or Mortgage) Contingency
Also called a loan contingency, this clause gives buyers time to secure mortgage approval. If their financing falls through — for example, due to a low credit score or changes in income — they can cancel the contract without penalty.
✅ What it means for you:
- Financing contingencies typically last 21–30 days. During this period, your property is effectively “off the market.”
- If the buyer can’t secure a loan, the deal may fall through, forcing you to start over with new buyers.
💡 Seller Tip: Ask for pre-approval letters before accepting an offer. Pre-qualified buyers are more serious and more likely to close.
3. Appraisal Contingency
If the buyer is using a mortgage, the lender will order an appraisal to ensure the property is worth the agreed-upon purchase price. If the appraisal comes in lower than expected, the buyer can back out, renegotiate, or ask you to lower the price.
✅ What it means for you:
- Low appraisals can derail deals, especially in hot markets where bidding wars push prices above appraised value.
- You may need to negotiate — by lowering the price, splitting the difference, or asking the buyer to cover the gap.
💡 Seller Tip: Pricing your home accurately from the start reduces the risk of appraisal issues. Using comparable recent sales (“comps”) is key.
4. Home Sale Contingency
This contingency allows the buyer to purchase your home only if they sell their current home first. If their property doesn’t sell within a specified time, they can cancel the contract.
✅ What it means for you:
- These contingencies introduce the most uncertainty and potential delays.
- Your home could sit off the market while you wait for the buyer’s sale — and there’s no guarantee it will happen.
💡 Seller Tip: If you accept a home sale contingency, ask for a “kick-out clause.” This allows you to continue marketing the property and accept other offers if the buyer’s home doesn’t sell in time.
5. Title Contingency
This protects the buyer if there are issues with your property’s title — such as liens, boundary disputes, or ownership claims. The sale won’t proceed until the title is cleared.
✅ What it means for you:
- Title issues must be resolved before closing.
- In most cases, they’re handled by the title company, but complex problems can cause significant delays.
💡 Seller Tip: Review your title report early and resolve any known issues before listing. This prevents last-minute surprises.
6. Insurance Contingency
Some buyers include a contingency requiring them to obtain homeowners insurance before closing. If they can’t secure coverage — for example, due to location risks (like flood zones) or property condition — they may walk away.
✅ What it means for you:
- Rare, but worth noting if your property is in a high-risk area.
- Addressing known issues (like an old roof or electrical system) can make the property easier to insure.
⚖️ How Contingencies Affect You as a Seller
Contingencies are not inherently bad — they’re a standard part of the home-selling process. But they do affect your sale in important ways:
✅ Pros:
- Can make buyers feel more confident and committed.
- Often lead to smoother transactions when expectations are clear.
- Allow for creative negotiation opportunities (e.g., adjusting terms to keep the deal alive).
❌ Cons:
- Add uncertainty and potential delays to the process.
- Increase the chances of the deal falling through.
- May give buyers leverage to renegotiate terms or price.
💡 Tips for Managing Contingencies Like a Pro
Contingencies don’t have to be intimidating. With the right approach, you can handle them smoothly — and even use them to your advantage.
1. Set Expectations Early
When listing your home, decide which contingencies you’re comfortable accepting and which are dealbreakers. For example, you might accept an inspection contingency but reject a home sale contingency.
2. Evaluate the Whole Offer — Not Just the Price
A slightly lower offer with fewer contingencies can often be more attractive than a higher offer loaded with conditions. Always weigh the total package before deciding.
3. Use Counteroffers to Your Advantage
If a buyer’s contingency makes you uncomfortable, counter with revised terms. For example, shorten contingency deadlines, request a larger earnest deposit, or include a kick-out clause.
4. Stay Organized and Proactive
Once you’re under contract, track contingency deadlines carefully. Missing a deadline — on your end or the buyer’s — can jeopardize the sale.
5. Work With a Real Estate Attorney (Optional but Smart)
If you’re selling without an agent, having an attorney review your contract can help you fully understand contingency language and protect your interests.
🏁 Final Thoughts: Contingencies Are Part of the Process — But They’re Manageable
Contingencies can feel complicated, especially if you’re selling your home on your own, but they’re simply tools designed to protect both parties and ensure the transaction is fair and transparent. The key is to understand them, anticipate their impact, and manage them strategically.
When you know how contingencies work — and how to negotiate them — you’re in control. You’ll make smarter decisions, reduce the chances of surprises, and move toward a successful closing with confidence.
✅ Final Tip: Always remember that contingencies are negotiable. You have the right to accept them, reject them, or propose alternatives — and doing so thoughtfully can significantly improve the outcome of your sale.
