Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

San Diego Home - Contingency Clause

How We Make Money

Homebuyer.com is your trusted guide to homeownership. Since 2003, our team has offered real-world expertise and advice to tens of millions of U.S. home buyers. Our content stands on its integrity: it's factual, unbiased, and free from outside influences. Read more about our governing editorial guidelines.

We also exist for profit and want our readers to understand how we make money.


Homebuyer.com is a mortgage-company-affiliated publisher. We earn compensation when you click specific links on the website, or apply for a mortgage with Homebuyer.com or partner listed in our comparison tables. Our partners compensate us differently, so we randomize our tables to protect our readers from steering. We may also earn compensation for advertisements on the site, which are indicated clearly. Note that limitations in our software, whether we originate mortgages in your area, and credit factors may affect the offers and comparison tables you see on various parts of this site. We do not include offers for every mortgage product available. Someday, we hope we will.

Certified Accurate

Certified Accurate

Your trust matters to us. This article was thoroughly checked for accuracy as of January 21, 2024. Homebuyer.com ensures every piece of information we share reflects the latest in mortgage standards. Learn more about our commitments to our reader in our editorial guidelines.

What is a Contingency Clause?

A contingency clause is an addition to a real estate contract to let parties back out without penalty under certain circumstances.

A Longer Definition: Contingency Clause

Contingency clauses let buyers or sellers back out of a real estate deal under specific conditions with no legal or financial consequences. They are protection against issues with the home, its title report, buyer qualifications, or anything else that is unknown at the time of offer acceptance.

Most contingency clauses in a real estate contract protect the home buyer, and some protect the seller.

Contingency clauses are particularly important for protecting earnest money. When a contingency clause is activated, the buyer can back out of the contract legally and reclaim their earnest money, which would otherwise be at risk.

The most common contingency clauses in a contract include:

Home Inspection Contingency

A home inspection contingency clause gives home buyers the right to hire a home inspector to identify potential problems with the property. If the home inspection reveals major issues, such as structural damage or outdated electrical systems, the buyer can negotiate with the seller for repairs, a price reduction, or even back out of the deal.

Mortgage Financing Contingency

The mortgage financing contingency clause defines a time window for the buyer to get their mortgage approved. If the buyer’s mortgage cannot be approved, they can withdraw from the contract without penalty. Sellers rarely accept this clause, demanding buyers are pre-approved before agreeing to a contract.

Home Appraisal Contingency

The home appraisal contingency ensures the home’s appraised value at least meets the agreed sales price. Should the home appraise for less than its purchase price, the buyer gets the right to renegotiate the price, make up the difference in cash, or opt out of the purchase.

Sale of Current Home Contingency

The sale of current home contingency is linked to the buyer’s inability or unwillingness to purchase a new home before selling their existing home. The buyer can safely exit the contract if their current home doesn’t sell within the specified period.

Title Contingency

A title contingency is included to protect the buyer from future legal disputes over property ownership. It ensures the property title is free from liens, encumbrances, or legal issues. Title contingencies are common in all-cash deals.

Contingency Clause: A Real World Example

First-Time Home Buyer Stories: Contingency Clause

Imagine a first-time home buyer who makes an offer to buy a home. Their offer letter contains a home inspection contingency to which the seller agrees. Both parties sign the contract so the home buyer gives their earnest money deposit on the home and hires a home inspector to examine it.

During their home inspection, the home inspector uncovers water damage and a weak foundation, in addition to faulty plumbing. The buyer realizes the risk of buying the home and the high cost of repairing the problems.

They exercise their home inspection contingency and back out of the deal, getting their earnest money back in full.

Common Questions About Contingency Clauses

What happens if a home buyer can’t meet a contingency in the contract?

If a buyer cannot meet a contingency, such as getting a mortgage approved or selling their current home, they can typically back out of the contract without losing their earnest money.

Are contingency clauses negotiable?

Yes, contingency clauses are negotiable. Both buyers and sellers can negotiate the terms, including the time frame and conditions, of each contingency.

Can a buyer add contingencies after an initial offer?

Adding contingencies after an initial offer typically requires a new agreement or an amendment to the existing contract, which both parties must agree to.

What are the standard contingency clauses in a real estate purchase contract?

Contingency clauses in a real estate contract vary based on state laws and local real estate customs, so there are no standard clauses.

Is it common to have multiple contingencies in one contract?

Yes, it’s common to have multiple contingencies in a single real estate contract, each addressing different aspects of the transaction and offering specific protections.


       A contingency clause is an addition to a real estate contract to let parties back out without penaltyunder certain circumstances.

Subscribe to our Newsletter

Be a better buyer. Subscribe now and never miss out on exclusive insights, new market trends, and first-time buyer programs.

Ready to get started?

Finding your dream starts here. Apply in minutes.

Get Pre-approved
© 2021-2024 All rights reserved. Growella Inc d/b/a Homebuyer. Homebuyer.com is powered by Novus Home Mortgage, a division of Ixonia Bank, NMLS 423065. www.nmlsconsumeraccess.org Homebuyer is located at 230 Findlay Street, Cincinnati, Ohio 45214. Novus Home Mortgage, a division of Ixonia Bank, is located at 20225 Water Tower Blvd. Suite 400, Brookfield, WI 53045. We have no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture, or any other government agency. US Government agencies have not reviewed this information and this site is not connected with any government agency. Equal Housing Lender. Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. The receipt of the application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.
Get Today's Mortgage Rates »