What Is a Contingency Clause in Real Estate?

📄 What a Contingency Clause Means

When an offer is accepted, the contract becomes “contingent” on certain events — such as securing financing, passing an inspection, or confirming the property’s appraised value.

If any contingency isn’t met by the deadline, the buyer can typically cancel the contract and recover their earnest money deposit. These clauses make transactions fair, transparent, and lower-risk for both sides.

🔑 Common Contingency Clauses

There are several types of contingency clauses that appear in most real estate contracts. The three most common are:

• Financing Contingency: Allows the buyer to cancel if they can’t secure a mortgage loan by a set date.
• Inspection Contingency: Gives the buyer time to have the property professionally inspected and negotiate repairs or credits if issues are found.
• Appraisal Contingency: Protects the buyer if the home appraises for less than the agreed purchase price, which could affect their loan approval.

Each clause serves as a safety net — ensuring the deal moves forward only when the key financial and property conditions are satisfied.

💡 Why Contingencies Matter

Contingency clauses balance risk. For buyers, they provide time to verify financing, inspections, and valuations before committing. For sellers, they define clear timelines and prevent drawn-out negotiations.

When listing FSBO through Brokerless, it’s smart to review each contingency type so you understand what can trigger a delay or cancellation — especially if multiple offers are involved.

⚖️ How Contingency Clauses Work in a Purchase Agreement

Contingencies are time-sensitive. Buyers typically have a few days to complete inspections, confirm loan approval, or address appraisal shortfalls. If deadlines pass without resolution, the clause may expire — or the contract can be amended through mutual agreement.

Removing contingencies (“waiving contingencies”) can make an offer more competitive but increases buyer risk. Sellers often weigh this factor when evaluating multiple offers.

Understand Every Clause Before You Sign

Whether it’s financing, inspection, or appraisal — knowing how contingency clauses work helps protect your deal. List FSBO through Brokerless and gain peace of mind from start to close.