What contingencies should I include?
Standard contingencies
Financing contingency: allows you to back out if you can't get a loan. Inspection contingency: lets you renegotiate or cancel if major issues are found. Appraisal contingency: protects you if the appraisal comes in low.
Title contingency: ensures the seller can deliver clear title. In off-market deals, sellers often prefer fewer contingencies, so consider which ones are essential for your risk tolerance.
- Financing: protects your deposit if loan approval falls through.
- Inspection: gives you an out or negotiating leverage for repairs.
- Appraisal: prevents overpaying if the bank's appraisal is lower than the price.
- Title: ensures no liens or ownership disputes.
- Sale of current home: only if you need the proceeds to buy.
When to waive contingencies
In competitive off-market situations, waiving contingencies can make your offer more attractive. But only do so if you have the cash reserves to handle potential issues.
For example, if you're confident in the property's condition and have a strong financing pre-approval, you might waive the appraisal and inspection contingencies. However, never waive title—you need to ensure clear ownership.
Common mistakes
- Including too many contingencies, which can make your offer seem weak or cause the seller to reject it.
- Waiving all contingencies without understanding the risks, like hidden structural problems or title issues.
- Using a standard contingency timeline that's too short for your due diligence, leading to rushed decisions.
