In competitive markets, sellers often add contingencies to make a sale more enticing. Likewise, buyers will add contingencies in the contract to encourage sellers to accept an offer. However, it’s important to understand how contingencies work and how they affect your rights as a buyer during the transaction, especially in a highly competitive California marketplace.

House-sale contingency

If you’re selling a home and buying a new one at the same time, a house-sale contingency is worth considering. This clause allows you to back out of a purchase if your home hasn’t sold yet. It’s excellent protection for you as a buyer to allow you to back out of the sale without losing any of your earnest deposit money.

Financing contingency

A financing contingency states that the sale of the property is based on the buyer being able to secure funding before the transaction is complete. If you can’t obtain a loan for some reason, this clause protects you as a buyer to ensure that you aren’t responsible for coming up with the money to buy the home on your own.

Inspection contingency

As a buyer, you have a right to have a licensed home inspector check out the home you’re about to purchase within a specific timeframe (usually a week) after you sign the purchase and sales agreement. When the inspection is completed, you’ll get a detailed report about the home. At this point, you can request the seller make repairs to the house. 

The seller can simply agree to make the repairs or make a counteroffer to you in the form of a cash payment. The seller can also refuse to make the repairs, which allows the buyer to walk away from the sale.

Contingencies can help you save money and time if something in the process goes awry. If you’re buying a home in California, talk to your real estate agent about contingencies and whether to include them in your purchase agreement.