When buying a home there are many things to consider, including the best way to submit an offer that will make the process as easy and stress-free as possible. Including a contingency clause, which can be beneficial to either buyers or sellers and there are many different types to consider when offering or accepting a purchase agreement.

What is a Contingency Clause?

 A real estate contingency is an additional term to be met included in a purchase agreement. Essentially, these clauses give either the buyer or seller the right to cancel a contract before closing, under certain circumstances. 

Types of Contingencies

Home Inspection Contingency

This is a clause that benefits the buyer and states that the buyer can cancel the contract if, within the given time period, they perform a home inspection and something of concern is found and a resolution between buyer and seller cannot be reached.

Property Sale Contingency

This clause states that the offer for purchase of the new property will only continue if the buyer is able to sell their current home in a certain time frame. This contingency makes it difficult to “win” in a multiple offer scenario. Sellers may accept backup offers while their home is contingent upon property sale, but their marketability is reduced under the Contingent upon Property Sale status in the MLS.

Financing Contingency

This is often also referred to as a Mortgage Contingency and it is put in place to protect the buyer. In this case, the buyer must obtain financing to secure the new home.  If they are unable to, they can either terminate the contract or they can request more time. Any requests for extensions must be agreed upon in writing by both buyers and sellers. 

Escalation Clause

This clause is used when there is a multiple offer situation on a property and a buyer wants their offer to be competitive. The buyer includes language saying that they’ll increase their offer by a certain amount over a higher bid, up to a certain dollar amount. This clause is only used in a seller’s market with very limited inventories.

Reverse Contingency

This contingency benefits the seller. This clause states that the sale of a seller’s home is contingent upon the seller finding suitable housing. If the seller is able to find a home that suits his/her needs then the contingency is removed and the purchase agreement will be fully accepted and move towards closing. If the seller is not able to find a home in the time stated on the contingency, then both parties will sign a cancellation of the purchase agreement or negotiate longer timelines.

Risks of Contingencies

Some of the biggest risks of contingency amongst buyers (other than a reverse contingency) are that they make an offer less competitive in a market where there are multiple offers. When working in a highly competitive market, removing contingencies from an offer might be more beneficial, if the buyer is comfortable proceeding without them.


When looking at a reverse contingency it also has some risks, but for the sellers. In a market similar to the current market, where there is very little inventory to choose from, if the seller is unable to find another home to purchase or rent in time, the seller may lose that buyer. This would result in the seller having to put their home back on the market and start the selling process again. 


The Bottom Line: Experience Matters

No matter the contingency, each one has its own benefits and risks. Each one of our JBeal Realtors is well-versed in drafting contracts and remaining competitive while protecting your interests. We have 20 years of experience as a brokerage and thousands of transactions and satisfied clients.


In this highly competitive market, it’s so important to use top-notch professionals when making such a large investment. The last thing you want to do is make an impulse purchase and end up in a negative equity situation.


We are experts in guiding sellers through multiple offer situations and choosing the right offer for them. It’s not always the highest price that wins when there are so many other factors that come into play. Experience Matters. Make sure you’re working with one of our real estate pros at JBeal real estate group!