What Is a Contingency in Real Estate?

Whether you're a first-time buyer nervously submitting your first offer or a seasoned seller weighing multiple bids, one word will come up in nearly every transaction: contingencies. Understanding what they are, how they work, and when to use — or waive — them could save you thousands of dollars and a great deal of stress.

What Is a Contingency, Exactly?

Think of a contingency as an "escape hatch" built into your purchase agreement. It's a condition that must be met before the sale becomes final. If the condition isn't satisfied, the buyer typically has the right to walk away from the deal — and in most cases, get their earnest money back.

In plain terms: a contingency says, "I want to buy this home, as long as..."

• ...the inspection doesn't turn up anything major.
• ...my mortgage gets approved.
• ...the home appraises for at least the purchase price.
• ...I'm able to sell my current home first.

Contingencies are not a sign of distrust. They're standard practice. According to the National Association of Realtors (NAR), roughly 76% of all home purchases include at least one contingency — and Zillow's 2025 Consumer Housing Trends Report puts that number even higher, at 85% of buyers.

Why Contingencies Matter (for Both Buyers and Sellers)

For Buyers

Contingencies are your financial and legal protection. Purchasing a home is likely the largest transaction of your life. Without contingencies, you're agreeing to buy a property no matter what you discover after signing — even if the roof is failing, your loan falls through, or the home appraises $30,000 below your offer price.

For Sellers

While contingencies may feel like uncertainty, they're also a signal of a serious buyer. A buyer who includes a financing contingency has done their homework — they know they need the loan to close. A buyer who skips contingencies entirely can seem attractive in the moment, but it doesn't always mean a smoother path to closing.

"Contingencies protect both sides of the transaction. When used properly, they actually increase the likelihood of a deal making it to the closing table." — Real estate industry consensus

The 5 Most Common Contingencies

1. Home Inspection Contingency

Used by: 65% of buyers (Zillow, 2025)

This is the most common contingency — and for good reason. It gives you the right to hire a licensed home inspector to thoroughly evaluate the property before you're locked in. The inspector will assess the roof, foundation, HVAC system, plumbing, electrical, and more.

What can happen:

• The inspection comes back clean → you proceed with confidence
• Issues are found → you can negotiate repairs, request a credit, or walk away

Real-world example: Imagine you're buying a 1980s colonial. The home looks beautiful, but your inspector discovers the furnace is near the end of its lifespan and there's evidence of water intrusion in the basement. With an inspection contingency, you can ask the seller to make repairs, reduce the price, or offer a closing credit — or simply exit the deal penalty-free.

Key stat: According to a Redfin survey of agents, 70% reported that inspection-related issues were the leading cause of contract cancellations. This makes the inspection contingency arguably the most valuable protection you can have.

2. Financing (Mortgage) Contingency

Used by: 56% of buyers (Zillow, 2025)

Also called a "loan contingency," this clause protects you if your mortgage doesn't come through. Even if you've been pre-approved, final loan approval can be derailed by changes in your employment, credit score, or the property's eligibility.

What can happen:

• Your loan is approved → the contingency is satisfied and you move forward
• Financing falls through → you can exit without losing your earnest money deposit

Key stat: A Zillow 2024 seller survey found that financing problems account for approximately 40% of reported deal fallthroughs — making this one of the most critical contingencies to keep in place.

Pro tip for buyers: Getting fully underwritten pre-approval (not just pre-qualification) before you make an offer significantly reduces the risk of financing issues derailing your deal.

3. Appraisal Contingency

Used by: 53% of buyers (Zillow, 2025)

Before a lender will approve your loan, they'll order an independent appraisal to confirm the home is worth what you've agreed to pay. If the home appraises below the purchase price, your lender will only finance based on the appraised value — leaving a gap you'd otherwise have to cover out of pocket.

What can happen:

• Home appraises at or above the purchase price → smooth sailing
• Home appraises below → you can renegotiate the price, make up the difference in cash, or exit the deal

Key stat: In 2024, 8% of appraisals came in lower than the sales price — a meaningful risk, especially in fast-moving markets where bidding wars push prices above comparable sales.

Real-world example: You offer $425,000 on a home. The appraisal comes back at $400,000. Without an appraisal contingency, you're on the hook to either bring an extra $25,000 to the table or risk losing your earnest money. With the contingency, you have options.

4. Home Sale Contingency

This contingency is for buyers who already own a home and need to sell it before they can purchase a new one — often because they need the equity or can't carry two mortgages simultaneously.

What it means for sellers: This is the riskiest contingency to accept from a seller's standpoint. You're essentially putting your sale on hold while waiting for the buyer's home to sell. Many sellers will counter with a "kick-out clause" — allowing them to continue marketing the home and accept another offer if one comes in.

Tip for buyers: If you're in this situation, consider selling your home first before making an offer, or speak with a lender about bridge loan options that could help you move without the contingency.

5. Title Contingency

This protects the buyer from purchasing a property with unresolved legal issues tied to ownership — such as unpaid liens, back taxes, boundary disputes, or claims by a previous owner.

A title search is typically conducted by a title company early in the transaction. If issues are found, the contingency gives the buyer time to resolve them or exit. Title insurance is almost always recommended (and often required by lenders) to protect against any issues that surface after closing.

What Happens to Deals With Contingencies?

Here's the reassuring news: most real estate transactions make it to closing.

• <10% of all contracts are terminated before closing in typical market conditions (NAR)
• In stable markets, contingent deals fall through at a rate of 5–8% (NAR/Realtor.com, 2025)
• In high-uncertainty or high-rate environments, that rate can climb to 12–15% (Redfin)
• Per Realtor.com's 2025 data, approximately 93% of listings moved from contingent to closing within their contracted timeline

So while contingencies add conditions to a deal, they rarely kill it — they simply ensure that both parties are protected along the way.

The Trend of Waiving Contingencies: A Word of Caution

In highly competitive markets, some buyers have waived contingencies to make their offers stand out. This became especially common during the pandemic buying frenzy of 2020–2022.

As of the most recent NAR Realtors® Confidence Index (April 2026):

• 18% of buyers waived the inspection contingency
• 19% of buyers waived the appraisal contingency

While waiving contingencies can make an offer more attractive to sellers, it comes with real risk.

"It definitely makes the offer stronger because sellers, when looking at multiple offers, weigh the highest price but also look for the least risk in the transaction." — Real estate professional quoted by HomeLight

For buyers: Waiving contingencies means accepting the property and the deal as-is. If the inspection uncovers $20,000 in needed repairs or the appraisal comes in low, you could lose your earnest money — or be forced to close on a property at an inflated price.

Smarter alternatives to waiving contingencies outright:

• Shorten the timeline — Agree to complete inspections in 5–7 days instead of the standard 10–14
• Increase your earnest money deposit — Shows commitment without surrendering protection
• Get fully underwritten pre-approval — Reduces the perceived financing risk for sellers
• Include an escalation clause — Automatically increases your offer if a competing bid comes in

A Note for Sellers: How to Navigate Contingencies

If you're listing your home, here's what to keep in mind:

1. Expect contingencies — The vast majority of serious buyers will include them. They're not a red flag.
2. Review timelines carefully — A buyer who asks for a 21-day inspection period in a fast market may slow your closing. Negotiate tighter windows when possible.
3. Consider a pre-listing inspection — Identifying and addressing issues before going to market can reduce the likelihood of a buyer's inspection derailing the deal.
4. Understand the appraisal risk — If you're pricing your home aggressively, a low appraisal could become a negotiating point. Work with your agent to price based on solid comparable sales.
5. Home sale contingencies deserve extra scrutiny — Ask your agent about adding a kick-out clause so you're not left waiting indefinitely.

Timeline: What to Expect Once You're Under Contract

Timelines vary by market, lender, and contract terms. Your agent will provide a specific schedule.

Final Thoughts: Don't Fear the Contingency

Contingencies aren't obstacles — they're guardrails. They exist to make sure that when you hand over hundreds of thousands of dollars for a home, you know what you're getting and that the deal is built on solid ground.

Whether you're buying your first home or selling the house you've lived in for 20 years, understanding contingencies puts you in a position of knowledge and confidence. Work closely with a trusted real estate agent who can help you craft an offer — or evaluate one — that's both competitive and protected.

Because in real estate, the best deals aren't just the ones that close fastest. They're the ones that close right.

Have questions about contingencies or the home buying and selling process? Reach out to us!