What Contingencies Should You Include in Your Offer?

What Is a Contingency?

A contingency is a condition that must be met for the sale to go through. If the condition is not met, you can walk away with your earnest money intact. Contingencies protect buyers — but they also make offers less attractive to sellers.

The Three Must-Have Contingencies (Usually)

1. Inspection Contingency This gives you the right to hire an inspector and review the results. If you find major issues, you can request repairs, negotiate a credit, or walk away. Standard period: 7–14 days.

Do not waive this. Even in hot markets, at least do an informational inspection (where you can walk away but cannot negotiate repairs). The risk of buying a home with hidden structural or mechanical issues is too high.

2. Financing Contingency This says the deal depends on your loan being approved. If your financing falls through, you get your earnest money back. Standard period: 30–45 days.

Waiving this is risky. You could lose your deposit if your loan is denied. Only waive it if you have enough cash to buy the home outright if needed.

3. Appraisal Contingency This says the home must appraise for at least the purchase price. If it appraises low, you can renegotiate or walk away.

Consider waiving this in competitive markets — but only if you have the cash to cover a potential gap between the appraised value and your offer price.

Additional Contingencies Worth Considering

• Home sale contingency: If you need to sell your current home before buying. Weakens your offer significantly. Avoid if you can. - Sewer scope contingency: Separate from the general inspection. Worth adding for homes built before 1980. - Insurance contingency: In areas with wildfire or flood risk, confirm you can get homeowners insurance before committing.

The Trade-Off in a Seller's Market

In a competitive market, fewer contingencies make your offer stronger. Sellers want certainty. An offer with an inspection contingency, financing contingency, and appraisal contingency feels uncertain.

The smart compromise: Keep all three contingencies but shorten the time periods. A 7-day inspection, 21-day appraisal, and 30-day financing period looks much stronger than 14-day, 30-day, and 45-day periods.

What Happens When You Waive Contingencies

If you waive the inspection contingency and later discover a $20k foundation issue — you own it. You cannot back out without losing your earnest money.

If you waive the financing contingency and your loan falls through — you lose your earnest money.

Only waive contingencies when you have a backup plan (enough cash reserves) and fully understand the risk.

The Bottom Line

Always include inspection and financing contingencies. Appraisal can be waived with caution. Shorten timelines instead of eliminating contingencies. Your agent should guide you based on local market conditions.