Real Estate

Most Purchase Agreements Are Contingent On Which Two Items?

Most purchase agreements in real estate are contingent on two items - The home inspection and mortgage financing contingencies

Most purchase agreements are contingent on which two items? Do you know the answer?

Another way of asking the question is, which are the two most important types of contingencies in an offer to purchase? Many real estate agents will be asked this question.

Most real estate contracts have two standard contingencies. When buying or selling a home, you must grasp the language you’re likely to see and agree to.

The two most common real estate contingencies are a home inspection and mortgage financing. The majority of all contracts will contain language that addresses these two contingencies.

A purchase agreement contingent on these two items has many benefits for a buyer, which we’ll cover at length.

You can determine whether or not a contingency is present in a purchase agreement by looking at the language. If the language includes the words “subject to,” “upon,” or “upon the occurrence of,” then the contingency is likely present.

What Are The Most Common Contingencies Found in Purchase Agreements?

Home buyers should be most concerned about the home inspection and financing contingencies when shopping for a home.

Few home buyers want to purchase a home only to find out about problems after they own the property.

Including a home inspection clause afford a buyer the protection needed to ensure their investment is protected. A mortgage contingency clause is crucial to ensure a buyer has the necessary funds to purchase the property.

Having home inspection and financing contingency clauses gives the buyer the ability to get their earnest money refunded if things do not go as planned.

Having these two contingencies in your purchase agreement as a home buyer should ensure the home buying process goes more smoothly.

What Does Having a Contingency Contract in Real Estate Mean?

A real estate contingency contract is a purchase agreement that allows the parties to complete the sale if certain conditions are met. So, when contingencies are in place, conditions must be met for the contract to become binding on the parties.

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If the agreed-upon conditions are not met, either a buyer or a seller can escape the contract. Real Estate contingencies are added to real estate contracts to protect a buyer but can also work against them.

For example, in hot real estate markets that favor home sellers, the more contingencies added to an agreement, the less likely the seller will accept.

In fact, many buyers have their offers rejected due to their contingencies in the contract when it is an extreme seller’s market with house bidding wars.

To get a home they love, some home buyers will remove the standard contingencies such as the home inspection and financing clauses. Buyers do this to ensure they are the winning bidder for the property.

It is essential to consult with your real estate agent to give solid advice on when it will be necessary to remove common contingencies.

Of course, it is vital to have adequate contingencies in place when necessary but not at the expense of losing out on house after house.

A Closer Look at The Two Most Common Contingencies in Real Estate Purchase Agreements

Let’s have a more in-depth look at the two most common real estate contingencies in contracts.

The Home Inspection Contingency

A home inspection contingency gives a buyer the right to inspect the property with a licensed home inspector. The contingency will determine how long the buyer has to complete the inspection and deliver the results back to the seller.

Typically, the home inspection contingency period will be between seven to fourteen days from when an offer is accepted.

Some real estate contracts will also specify a dollar amount for the buyer to terminate the sale. For example, the home inspection clause could state if the total amount of defects exceeds $5000, the buyer would have the right to cancel the sale.

At times when issues are discovered during an inspection, there will be a second round of negotiations. A buyer could ask the seller to remedy the problem or provide a concession for a specified amount of money.

When buyers and sellers cannot agree, the sale can fall through. Sellers need to prepare for a home inspection, given that it is such a significant hurdle in the transaction.

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On the other hand, buyers need to be reasonable when making requests of the seller. A home inspection aims to discover significant defects that are structural or mechanical. A buyer has every right to expect a safe and sound home.

The purpose of a home inspection is not to create a punch list for a seller to make the property perfect.

The Mortgage Financing Contingency

When purchasing a house, most buyers don’t have the luxury of paying cash. To finance the acquisition of a property, they will need assistance from a mortgage lender.

The typical contingency language on financing will give the buyer a certain amount of time to procure a mortgage. The standard time frame to get a mortgage is four to six weeks.

The amount of money the buyer wants to borrow will also be stated in the contingency.

If, despite a buyer’s diligent efforts to get financing is not possible, a buyer will be able to get their earnest money back as long as the seller is notified in writing before the mortgage contingencies expiration.

Occasionally a buyer will need an extension on their mortgage contingency time period, especially during times of high lending volume.

When a buyer has been pre-approved for a mortgage, there are rarely any problems unless the buyer’s financial status changes, such as losing their job.

What Are Other Potential Contingencies Besides The Most Common Ones?

There are a couple of other potential contingencies besides the two most common ones we have discussed. They are a home sale contingency and an appraisal contingency.

Home Sale Contingency

A home sale contingency allows the buyer to make the purchase contingent on their existing property selling. Home sale contingencies are often frowned upon because they create significant risk for a seller. Most of the time, they are rejected by sellers.

Appraisal Contingency

An appraisal contingency is sometimes included in a real estate contract with specific language. It usually says the property needs to appraise for at least the sale price. If the appraisal comes in lower than the agreed-upon price, the buyer will be able to terminate the sale.

Generally, you will see appraisal clauses more often in buyer’s markets. When the real estate market favors the seller, it is not uncommon for buyers to waive the appraisal or put in appraisal gap coverage to make their offer more favorable in the eyes of the seller.

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Sometimes the appraisal is waived outright.

What Does Contingent Mean?

When looking for a home, you will likely see homes marked as contingent online on some of the best real estate sites, such as Zillow or

The meaning of contingent is that a buyer and seller have executed a purchase agreement. The property is now under contract. On most occasions, Contingent real estate will stay that way until the contingencies have been satisfied.

Typically, once the contingencies have been cleared, the status will be changed to pending in MLS.

Depending on where you are located, it could make sense to change the listing status to pending immediately, even when there are open-ended contingencies left to satisfy. Read contingent vs. pending to learn more.

Some real estate agents understand how cumulative days on market in the MLS can look harmful to a seller if the sale falls through.

Final Thoughts

You’ve now learned that most real estate contracts are contingent on two items, although it is possible there could be others. Having a real estate contingency contract is the norm, not the exception.

In the event of unforeseen problems, real estate contingencies can provide a legal way out of the transaction.

Whether buying or selling, you must have a firm grasp of what the contingencies mean you agree to. Both buyers and sellers need to keep the contingency time frames straight.

If you have any questions about these common real estate contingencies, feel free to reach out.

About the author: The above Real Estate information on most purchase agreements are contingent on which two items were provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at [email protected] or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for 35+ years.

Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!

I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.

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