What Is a Contingency? The Deal-Saving Clause Every Buyer Should Understand

Contingencies protect you in real estate transactions. They’re conditions your offer is “contingent upon.” Without contingencies, you’re obligated to close even if major problems emerge. That’s dangerous.

The Three Critical Contingencies

Inspection Contingency

This gives you 7-10 days (typically) to hire an inspector, discover property problems, and negotiate repairs or price reductions. Without inspection contingency, you close without professional evaluation. You discover foundation crack after closing—owner’s problem now.

With inspection contingency, inspector finds crack. You negotiate repair or price reduction before closing. If negotiation fails, you walk away without penalty.

Appraisal Contingency

Lender orders appraisal. If property appraises below your purchase price, you have protection. Example: You offer $450,000 for a Portland home. Appraisal comes in at $430,000. With appraisal contingency, you can renegotiate price down to $430,000 or walk away. Without it, you’re obligated to pay $450,000 despite appraisal showing lower value.

Financing Contingency

This protects your loan approval. If lender denies financing despite pre-approval, financing contingency lets you walk away. Without it, you’re obligated to close but can’t get financing—you lose earnest money and face lawsuit.

How Contingencies Work

You include contingencies in offer. Timeline: inspection (7-10 days), appraisal (depends on lender, typically 14-21 days from initial offer), financing (21-30 days). If contingency isn’t met (inspection reveals problems, appraisal is low, financing denied), you have right to renegotiate or walk. If you walk without legitimate contingency failure, seller keeps your earnest money.

Contingency Removal

Once you’re satisfied contingency is met, you remove it. Inspector approved property? Remove inspection contingency. Appraisal hit target? Remove appraisal contingency. Loan approved? Remove financing contingency.

Common Contingency Mistakes

•             Removing contingencies too early (before thorough inspection)

•             Not setting realistic appraisal protections (not enough down payment buffer)

•             Weak financing contingency wording (not detailed enough)

•             Not including title insurance contingency

Seller Perspective

Sellers negotiate contingency terms too. In strong buyer markets, sellers demand: - Shorter inspection periods (5 days vs. 10) - Aggressive appraisal gaps (buyer accepts $20K shortfall) - Earlier contingency removal dates

For Portland Buyers

Current market (2025) favors buyers. You have negotiating power on contingencies. Use it.

Typical good contingency set: 10-day inspection, appraisal protection at 5% gap, 21-day financing contingency, title insurance contingency.

Bottom Line

Contingencies protect you. They’re not seller-unfriendly; they’re reasonable protections. Buyers without contingencies are gambling. Always include them.