When Do I Need A Contingency in My Offer?

 

To Have or Forgo a Contingency When Buying a Home

 

Contingencies in Plain English

Contingencies are basically “escape hatches” in a contract. They let a buyer back out without losing their deposit if something goes wrong with inspections, loans, or appraisals.

Why agents like them: they protect us (and you) from future problems.
Why sellers don’t like them: they slow things down, create uncertainty, and can cost them time and money.

In a Competitive Market

When several buyers want the same house, the winning offers usually:

• Pay more than the asking price.
• Skip contingencies (no inspection, loan, or appraisal outs).
• Accept the home “as is.”
• Sometimes, even let the seller rent back for a while (for free).

If your offer includes contingencies, sellers may prefer a lower offer without them because it feels more “guaranteed.”

Example

• Buyer A: offers $1,000,000 with no contingencies.
• Buyer B: offers $1,020,000 with 10-day inspection and loan contingencies.

Most sellers will pick Buyer A—even though it’s $20K less—because it’s a sure thing. That means Buyer B essentially wasted $ 20,000 trying to “buy” time for extra inspections.

Alternatively, the seller will ask Buyer A with the lower offer to match your offer, and again, you’re on the losing end of the deal.

 

Inspections

If the seller already paid for professional inspections, asking for another 7-day inspection window can look suspicious. The seller now risks having to share bad or sloppy reports with future buyers, which could taint the property. Unless you have a good reason, relying on the provided inspections gives you a stronger position.

Loans & Appraisals

• Loan contingencies: If you’re pre-approved and even apply with two lenders (“double app”), you may not need this safety net.
• Appraisal contingencies: If the home appraises lower than your offer, the bank only lends based on the appraised value. You’d need to make up the difference.
  • Example: You offer $1M with 20% down. Appraisal comes in at $950K.
    • Bank lends 80% of $950K = $760K.
    • You cover the rest: $240K instead of $200K.
  • You don’t have to cover the full $50K shortfall, just your share (20%).

In our 30+ years, we’ve almost never seen appraisals kill a deal—99.8% come in at value or higher.

Bottom Line

• Contingencies = safety nets for buyers.
• No contingencies = stronger offer in a bidding war.
• Every contingency you can confidently skip makes your offer more attractive without raising the price.

Use contingencies only when you need them, not when you want them.