Buying a home is exciting, but the transaction can come with some risk. For instance, the home you\u2019re considering may have problems you didn\u2019t notice when touring the property, or you might not qualify for the home loan. Contingencies can protect you from some of these risks.<\/p>\n
Here\u2019s an overview of what contingencies are and which ones you might include in your offer:<\/b><\/p>\n <\/a><\/p>\n A contingent offer is an offer to purchase a home<\/a> that includes clauses allowing you to walk away from the deal if certain conditions aren\u2019t met. You\u2019ll typically get your earnest money<\/a> back, too, as long as it\u2019s written in the contract.<\/p>\n Buyers often include loan contingencies<\/a> to protect themselves in the homebuying process. You have several contingencies to choose from, but the most common contingency clauses are:<\/p>\n Sellers can either accept your offer, decline it, or negotiate the contingency details before moving forward. Contingencies rarely cause an offer to fall through, but it does happen. In May 2020, 76% of recently closed home sales included purchase contingencies, and 9% of all contracts were ultimately terminated, according to the National Association of Realtors<\/a>.<\/p>\n Among those canceled contracts, 7% were terminated due to problems with contingencies. Once you choose a home you\u2019d like to buy, you or the real estate agent will send a purchase offer to the seller. You can decide whether to include contingencies, and the seller can decide whether to accept the offer and may negotiate the details.<\/p>\n If you\u2019re not sure which contingencies to include, your real estate agent can provide guidance.<\/p>\n Here are some of the more common contingencies:<\/p>\n In the NAR report, 59% of homebuyers included a home inspection contingency in their offer \u2014 by far the most common type. The home inspection<\/a> clause gives you the right to have the home professionally inspected, which protects you against purchasing a home with significant and expensive issues.<\/p>\n Sellers typically want the inspection to take place within days of accepting the offer, so you (the buyer) can decide quickly whether you\u2019ll go through with the home purchase.<\/p>\n If the home inspector finds issues, you can negotiate the sales price, ask for repairs, or cancel the offer and potentially get your earnest money back.<\/p>\n During the underwriting process, the lender will order an appraisal<\/a> to figure out how much the home is worth. If the home appraises for less than the purchase price, you\u2019ll need to cover the difference or negotiate with the seller to lower the price.<\/p>\n But if you can\u2019t reach an agreement, the appraisal contingency allows you to cancel the deal and avoid overpaying for the home.<\/p>\n Although homebuyers typically get pre-approved for a mortgage<\/a> before starting the homebuying process, it\u2019s not a guarantee they\u2019ll pass the underwriting review. A financing contingency allows you to terminate the home purchase agreement if you don\u2019t qualify for a home loan<\/a>, which protects you against buying a home you can\u2019t afford.<\/p>\n Credible can be a big help when trying to find a home loan. You can easily compare our partner lenders in minutes \u2014 all without leaving our platform.<\/p>\n\n
What is a contingent offer?<\/h2>\n
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\n<\/a><\/p>\nHow often do contingent offers fall through?<\/h2>\n
\n<\/a><\/p>\nTypes of contingencies<\/h2>\n
Home inspection contingency<\/h3>\n
Appraisal contingency<\/h3>\n
Financing contingency<\/h3>\n
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