First-Time Buyers - What are contingencies?

So, you've never bought a home before and you're ready to make an offer. You keep hearing about contingencies but just aren't sure what they are. I understand.

There are so many different terms and details to consider when buying a home, that it can get confusing. In my 12 years of selling homes to hundreds of buyers just like you, this is probably the most common as well as important question I get when I write an offer. So, what are contingencies and why should I care? In simple terms, contingencies are a way to protect a home buyer by giving you a legal way to cancel a sale contract if certain conditions are not met. For most buyers getting a loan, there are three contingencies built into the contract: financing, appraisal, and inspection. Of course, if you are paying cash for a home, the financing contingency doesn't apply. A financing contingency lets a buyer out of a contract if their loan doesn’t get approved for some reason. Let’s say (heaven forbid) that you lost your job one week after getting a home under contract. If the lender says that you can’t qualify for the loan without that job, this triggers the financing contingency, and you can get out of the contract. The appraisal contingency is there to protect you if the appraisal comes back for less than the contract price.

An inspection contingency gives you the ability to cancel a contract in the case that inspections show greater problems with the property than you are willing to deal with and/or the seller is willing to fix. This is a VERY general explanation of the most common contingencies used in real estate sales contracts. We’ll delve deeper into the specifics of each contingency in future videos, so be on the lookout for those soon. 

My team and I would be happy to help you understand more about contingencies. Feel free to reach us at 858-336-1114 or [email protected].