How does a contingent offer work?
Quick insights
- A contingent offer includes a protective clause allowing the buyer the option to back out of a home purchase without penalty if specific conditions aren’t met.
- There are different types of contingent offers, categorized based on what protective clauses apply. For example, inspection contingencies are related to the home inspection.
- Contingent offers provide the buyer with additional protection but may make their offer less appealing to sellers, especially in competitive markets.
A lot of uncertainty goes into the home-buying process. Buyers usually have to decide how much to offer on a property and how much earnest money and due diligence to include before the home inspection or appraisal.
Contingent offers are one way for buyers to protect themselves against the unknown.
What is a contingent offer?
A contingent offer on a house is an offer with a protective clause on behalf of the buyer. The contingency communicates that if the clause isn’t met, the buyer has the right to back out of the purchase.
This practice protects the buyer from:
- Losing earnest money
- Getting involved in a deal they can’t afford
- Encountering delegated issues that may arise along the way
The seller has the option to accept, reject or counter the contingent offer. The goal is to reach an agreement that benefits both the buyer and the seller.
The buyer chooses what contingencies, or specific terms, they want to include in the offer and may use the help of a real estate professional. A real estate professional, whether a lawyer or real estate agent, can help you understand your options and structure your offer with contingencies in place.
You can have zero, one or multiple contingencies in your offer. Whether the seller accepts them is a different story.
Types of contingencies in real estate
Now that you know the full contingency offer meaning, let’s break down some of the most common contingencies you might encounter when buying or selling a home:
Home inspection contingency
A home inspection is when a licensed professional takes a critical look at the inside and outside of a home. The inspection will uncover what kind of issues the buyer will deal with if they go through with the purchase.
Because it benefits them, buyers usually pay for the inspection. If the inspection uncovers a deal-breaking condition about the home, the buyer can choose to walk away. The inspection should happen soon after the buyer makes the contingency offer. That helps the buyer quickly decide whether to move forward with the purchase or allow the seller to put the home back on the market.
Appraisal contingency
A home’s listed value may be different than its appraised value. An appraised value is the true value of a home based on its location, square footage, functionality and more.
A professional home appraiser assesses a home’s true value before closing. If they arrive at a number significantly lower than what the seller has listed the home for, the buyer may be able to walk or negotiate the price down using the power of the appraisal contingency.
Using a mortgage contingency, if financing falls through
Roughly 74% of homebuyers financed their home purchase with a mortgage in 2024, rather than paying with cash. A mortgage contingency protects buyers from liability and the loss of their earnest money if their financial circumstances change and they need to cancel their offer.
If you’re buying a home with a mortgage, you should first get preapproved for a loan. Getting preapproved means a lender is tentatively willing to lend you a certain amount of money to finance a home. If your documented financial information changes in the time between preapproval and approval, your loan may fall through and affect your financial ability to make the purchase.
If that happens, you must inform the seller of this change within a certain amount of time if you want to walk away from the purchase with the earnest money back in your pocket. If you don’t inform the seller of your inability to finance the purchase, then you may still be liable to buy even without proper financing.
If you’re worried about your lender denying you a mortgage, then a mortgage contingency might make sense so you don’t lose your earnest money deposit.
Title contingency
A title contingency protects the buyer from a fraudulent seller or a seller who failed to clear up any liens on the home. The contingency will require that any liens or title issues are cleared before you make the purchase.
Home sale contingency
A home sale contingency is risky because it states that a buyer isn’t required to purchase from the seller if the buyer fails to sell their current home. A seller isn’t likely to accept this contingency because their home sale depends on the sale of someone else’s home, and that can be risky.
Insurance contingency
Homeowners’ insurance rates aren’t getting any cheaper, which is one reason why insurance contingencies have become more common in agreements. In certain cases, homebuyers can’t find reasonable insurance coverage. Buyers can sometimes use insurance contingencies to prevent finding themselves at a disadvantage for reasons they can’t control.
How to submit a contingent offer
Submitting a real estate contingent offer doesn’t have to be exhausting or stressful. Here’s how to do it:
- Understand the contingencies you may need: There are several types of contingencies that can arise in a home sale. Take time to assess which ones are most relevant to your situation and how they could impact your offer.
- Work with a real estate agent: An experienced agent can be a valuable partner in this process. They may help you structure your offer, explain the steps involved, and assist with negotiations.
- Get pre-approved for a mortgage: Obtaining a preapproval before submitting your offer can reassure the seller that you’re a serious buyer and ready to move forward.
- Include a substantial earnest money deposit: Providing earnest money can signal your commitment to the seller. In some cases, a higher deposit may help strengthen your offer, but requirements can vary.
- Be flexible and communicate: Work closely with your agent to address seller concerns. Sometimes, small concessions, like adjusting timelines, can potentially strengthen your case.
What are the advantages of contingent offers for buyers?
The primary advantages of contingent offers for buyers include:
- Protection against unforeseen issues: A contingent offer acts as a safety net. It allows you to back out of the deal without penalties if specific conditions, like a home inspection or financing approval, aren’t met. For example, if the inspection reveals costly repairs, you’re not locked into an agreement that could strain your finances.
- Flexibility to deal with challenges: Life happens, and contingencies give you room to adapt. If you need to sell your current home before closing on a new one, a sale contingency can make sure you’re not stuck owning two properties at once.
- Leverage in negotiations: Contingencies can also provide negotiating power. If an appraisal comes in low, for instance, a financing contingency allows you to revisit the price with the seller. This creates opportunities for fair outcomes, ensuring you aren’t paying more than the property’s value.
What are the downsides to making a contingent offer?
Of course, contingent offers come with risks, too:
- Less appealing to sellers. An offer with contingencies may be less appealing to sellers than one that comes with fewer conditions.
- More likely to fall through. If any of the contingencies aren’t met, the buyer can back out — forcing the seller to put their home back on the market, which can raise questions as to why the deal fell through.
- Potential for longer timelines. Contingent offers can extend the time to close. They allow for more back and forth at various steps in the process, like after the home inspection or when the appraisal comes back.
What happens when the seller accepts a contingent offer?
Once the seller accepts the contingency offer from the buyer, they can take their house off the market and hope the rest of the purchase goes swimmingly. If they accept the contingent offer but still want to keep their options open, they can enact what is called a kick-out clause. This clause lets them keep their home on the market for other potential buyers.
If they get another offer, they must give the contingent buyer a certain window to make the purchase. If the buyer makes it in time, the home is theirs. If they don’t, the seller can “kick the buyer out” and go in a different direction.
Can a seller accept another offer while contingent?
When a seller accepts a contingent offer, it means they’ve agreed to sell their home to a buyer, but only if certain conditions are met. However, that sale isn’t necessarily locked in.
Many contingent offers, as described above, include a “kick-out clause.” With this clause, the seller can leave their home on the market and accept backup offers. If a better offer comes along, the original buyer usually has a set amount of time to remove their contingency (like selling their home) or risk losing the deal.
How likely is a contingent offer to fall through?
Historically, it’s not common for home sales to fall through before closing. In May 2025, it happened 6% of the time, and not all of these situations are due to unresolved contingencies.
There are a few common reasons why contingent offers fall through. Sales can be impacted because of issues with the home inspection, such as:
- Water damage
- Elevated radon levels
- Mold infestation
- Problems with the septic system
- Structural issues (such as problems with the foundation, walls, roof, etc.)
- Poor well condition
- Serious pest problems
Of course, homes can also fail to appraise for the purchase price, or a buyer can change his or her mind or fail to get their financing in place. Sometimes, it’s a matter of an unknown title issue that causes problems with the sale.
In summary
If you’re a buyer who wants to make an offer on a home, a contingent offer may help get your foot in the door and secure your home purchase. It can also protect you from making an offer on a home you can’t afford, prevent a fraudulent sale or even prevent you from buying a home with a poor inspection.
Now that you better understand how a contingent offer works, you may be ready to take on the rest of your homebuying journey with confidence.
