<h2What Is a Contingency?</h2<pA contingency is a condition written into a purchase agreement that must be satisfied before the sale can proceed to closing.
If the condition is not met within the specified timeframe, the buyer typically has the right to cancel the contract and receive their earnest money back.
For sellers, contingencies represent risk — each one is a potential exit ramp for the buyer.
Understanding what each contingency means and how to negotiate around them is essential for every FSBO seller.</p<h2The Inspection Contingency</h2<pThe inspection contingency gives the buyer the right to have the home professionally inspected within a specified period — typically 7 to 14 days after the contract is signed.
If the inspection reveals issues, the buyer can request repairs, ask for a price reduction or credit, or cancel the contract.
As a seller, you have three options when a repair request arrives: agree to the repairs, offer a credit at closing in lieu of repairs, or decline and allow the buyer to cancel.
Most deals survive inspection if both parties are reasonable.
Completing a pre-listing inspection before you list your home eliminates most inspection surprises and gives you the opportunity to address issues on your own terms.</p<h2The Financing Contingency</h2<pThe financing contingency protects buyers who are purchasing with a mortgage.
It gives them a specified period — typically 21 to 30 days — to obtain a firm loan commitment from their lender.
If the buyer cannot secure financing, they can cancel the contract and recover their earnest money.
To minimize financing risk, require buyers to provide a pre-approval letter (not just a pre-qualification) with their offer, and verify that the pre-approval is from a reputable lender.
Cash offers carry no financing contingency and are therefore lower risk.</p<h2The Appraisal Contingency</h2<pWhen a buyer is using a mortgage, the lender will order an appraisal to confirm the home is worth at least the purchase price.
The appraisal contingency protects the buyer if the home appraises below the agreed purchase price.
In that scenario, the buyer can renegotiate the price, make up the difference in cash, or cancel the contract.
To reduce appraisal risk, price your home accurately based on comparable sales and have your CMA documentation ready to share with the appraiser if needed.</p<h2The Sale of Buyer's Home Contingency</h2<pSome buyers need to sell their current home before they can close on yours.
A sale contingency makes your contract conditional on the buyer's home selling first.
This contingency significantly increases your risk because you are now dependent on a transaction you have no control over.
If you accept an offer with a sale contingency, negotiate a "kick-out clause" that allows you to continue marketing your home and accept a better offer if one comes in, giving the contingent buyer a short window (typically 48 to 72 hours) to remove their contingency or cancel.</p<h2Negotiating Contingencies</h2<pIn a strong seller's market, you have more leverage to negotiate shorter contingency periods or request that buyers waive certain contingencies.
In a balanced or buyer's market, contingencies are standard and expected.
Never pressure a buyer to waive the inspection contingency entirely — a buyer who feels pressured may walk away, and a buyer who waives inspection and later discovers major issues may pursue legal action.
The inspection contingency protects both parties.</p