What Is a Contingency in Real Estate and How It Protects Buyers

When you’re buying a home, there’s a lot happening behind the scenes; getting the loan finalized, checking the condition of the house, securing insurance, and reviewing information from the seller. Most buyers don’t realize how many steps are involved until they’re already in the middle of it.

That’s where contingencies come in.

Understanding contingencies before you write an offer can help you avoid surprises, protect your money, and feel more confident about your decisions.

What Is a Contingency?

A contingency is a part of the purchase contract that says, “This sale can only move forward if certain things check out.”

It gives buyers a set amount of time to make sure everything is in order. If something doesn’t work out, the buyer usually has the option to renegotiate or walk away without losing their deposit.

Simply put, contingencies protect buyers from being locked into a purchase before all the facts are known.

Why Contingencies Matter

Buying a home isn’t just about liking the house. Buyers need time to confirm things like:

• Can the loan actually be approved?

• Is the home in the condition they expected?

• Can the property be insured?

• Are there any issues the seller disclosed that raise concerns?

Contingencies give buyers time to slow down, verify the details, and decide if moving forward still makes sense.

Without contingencies, buyers may be legally required to continue with the purchase even if something unexpected comes up.

The Main Contingencies Buyers Commonly Use

Every situation is different, but these are the most common contingencies used to protect buyers in California.

Loan Contingency

This protects buyers if their loan is not approved.

Even with a pre-approval, the lender still needs to fully review the buyer’s finances and the property. This contingency ensures buyers aren’t forced to buy a home they can’t ultimately finance.

Appraisal Contingency

This protects buyers if the home’s appraised value comes in lower than the agreed-upon purchase price.

If that happens, buyers may renegotiate, bring in additional funds, or decide not to move forward if the numbers no longer make sense.

Investigation (Inspection) Contingency

This gives buyers time to inspect the home and review reports about its condition.

Inspections may include:

• General home inspection

• Pest inspection

• Roof, sewer, or foundation evaluations

If problems are discovered, buyers can request repairs, ask for a credit, or choose not to proceed.

Insurance Contingency

This allows buyers to confirm they can obtain homeowners insurance at a reasonable cost.

Insurance availability has become more important in recent years, especially in certain areas.

Sale of Buyer’s Property Contingency

This applies when a buyer needs to sell their current home before buying a new one.

It protects buyers from ending up with two homes or two mortgage payments at the same time.

Additional Contingencies Buyers May See

There are also review-based contingencies that give buyers time to understand paperwork and obligations.

Informational Access to Property

Allows access for inspections, measurements, or contractor visits.

Review of Seller Disclosures

Gives buyers time to review all information provided by the seller and ask questions before committing.

Preliminary Title Report

Allows buyers to review ownership details, easements, or liens that could affect the property.

HOA (Common Interest) Disclosures

For condos or homes in an HOA, buyers can review:

• Rules and restrictions

• Financial health of the HOA

• Insurance coverage

• Meeting notes

Review of Leased or Liened Items

Applies to things like leased solar panels or other equipment tied to the property, so buyers understand any ongoing responsibilities.

Can Buyers Buy a Home Without Contingencies?

Yes, buyers can choose to remove contingencies, but it should always be done carefully.

In competitive markets, some buyers shorten timelines or remove contingencies to make their offer more attractive. This should only happen after fully understanding the risks and knowing exactly what you’re giving up.

The Bottom Line

Contingencies are one of the most important protections buyers have when purchasing a home. They provide time, flexibility, and options instead of forcing buyers to move forward before everything has been confirmed.

If you’re thinking about buying and want help understanding which contingencies make sense for your situation, I’m always happy to explain your options and guide you through the process step by step.