What Contingencies Should I Include in My Offer?

An inspection contingency can give the buyer an opportunity to investigate the property's condition and address certain issues according to the terms of the contract.

Depending on the contract, an inspection process may lead to:

• Requests for repairs
• Requests for credits
• Renegotiation
• Termination under specified circumstances
• Proceeding with the purchase as originally agreed

The specific rights and deadlines depend on the contract being used.

A financing contingency can address the buyer's ability to obtain the financing required to purchase the property.

This can be particularly important for buyers who are relying on a mortgage.

The contingency may establish requirements and deadlines related to loan approval and financing.

When a purchase is financed, the lender may require an appraisal.

If the appraised value comes in below the contract price, the buyer may need to determine how to address the difference.

Depending on the contract, the buyer may have certain options or obligations.

This is one reason buyers should understand appraisal provisions before agreeing to a purchase price.

Some buyers need to sell an existing property before they can complete the purchase of another home.

A home-sale contingency can address that situation.

While this type of contingency can provide important protection to the buyer, it can also make an offer less attractive to a seller who wants greater certainty that the transaction will close.

Waiving or limiting contingencies can sometimes make an offer more competitive.

But doing so can also shift additional risk to the buyer.

For example, removing an inspection contingency may make an offer more attractive to a seller, but it may also leave the buyer with fewer contractual protections if significant problems are discovered.

The decision should be based on the buyer's circumstances and a clear understanding of what protection is being given up.

A competitive offer doesn't necessarily require eliminating every buyer protection.

Sometimes an offer can be strengthened through:

• Clear deadlines
• Appropriate contingency periods
• Strong financing
• A reasonable closing timeline
• Appropriate earnest money
• Terms that address the seller's priorities

The objective is to balance competitiveness with an acceptable level of risk.

Contingencies often involve deadlines.

Missing a deadline can have consequences under the applicable contract, so buyers should know when each contingency begins, what action is required, and what happens if the condition isn't satisfied.

This is one area where professional guidance can be particularly valuable.

It can be tempting to remove contingencies simply because you want your offer to stand out. Before doing so, understand exactly what risk you're accepting in exchange for making the offer more attractive.

The right question isn't simply, "Will the seller like this?"

It's also, "Am I comfortable with what this change means for me?"