Homes in Tacoma - What Your Real Estate Contingencies Mean




When navigating the home buying process, contingencies are essential tools that protect buyers and help ensure a smooth transaction. A contingency is a condition that must be met for the sale to proceed. If a contingency is not satisfied, buyers typically have the right to back out of the deal without losing their earnest money, as long as dates are adhered to. Let’s explore four key contingencies: inspection, appraisal, buyer property sale, and financing.

Inspection Contingency

The inspection contingency is one of the most common and crucial safeguards for homebuyers. This clause allows buyers to hire a professional home inspector to assess the property’s condition. The inspection typically covers structural elements, plumbing, electrical systems, roofing, and HVAC systems. Though a home inspector will never find everything, they are an incredibly valuable asset for buyers hoping to purchase their new home.

If significant issues are uncovered—such as a cracked foundation, outdated wiring, or mold—buyers have the option to negotiate repairs or a price reduction with the seller. Alternatively, if the problems are severe, buyers may walk away from the transaction if the seller is unable to address them. This contingency provides peace of mind by ensuring buyers know what they’re purchasing. Here in cities like Tacoma, Gig Harbor, Lakewood or Seattle property inspections are even more important because of our weather and climate. 

Appraisal Contingency

The appraisal contingency ensures that the property’s value aligns with the purchase price. Mortgage lenders require an appraisal to determine the home’s market value. The appraiser is given information on the purchase price, and through factual means, works to ascertain the value. If the appraisal comes in lower than the agreed-upon price, the buyer has several options:

  1. Negotiate with the seller to lower the price.
  2. Pay the difference out of pocket.
  3. Agree upon a price in between the purchase and the appraisal price.
  4. Walk away from the deal if an agreement cannot be reached.

This contingency protects buyers from overpaying for a property and ensures lenders are not financing more than the home is worth. Buyers who purchase with cash generally do not have an appraisal unless they are curious of the market value. Buyers who obtain FHA or VA financing, have more stringent appraisal standards than do buyers obtaining conventional financing. 

Buyer Property Sale Contingency

The buyer property sale contingency is vital for those purchasing a new home while needing to sell their current one. This clause stipulates that the purchase of the new home is contingent upon the successful sale of the buyer’s existing property.

While this contingency can provide financial security, it may make a buyer’s offer less attractive in competitive markets. Sellers may prefer offers without this condition, as it adds uncertainty to the timeline. To increase the likelihood of acceptance, buyers can demonstrate that their current home is already listed or under contract.

In Washington state, buyers who use this contingency can be bumped by another buyer who does not have the same contingency, and given notice to either remove their contingency or have the contract cancelled within a set period of time. 

Financing Contingency

The financing contingency—also known as a mortgage contingency—protects buyers if they are unable to secure a loan. This clause allows buyers to back out of the deal if their mortgage application is denied. Common reasons for loan denial include changes in credit score, job loss, or unexpected financial obstacles.

Buyers must be pre-approved for a mortgage before house hunting to demonstrate financial readiness and reduce the likelihood of financing issues. However, the contingency remains critical as it provides a safety net in case of unforeseen circumstances.

Why Contingencies Matter

Real estate contingencies are essential for mitigating risks in a transaction. They provide buyers with the flexibility to address unexpected challenges and ensure they are making a sound investment. However, contingencies should be used strategically. In competitive markets, waiving certain contingencies may make an offer more appealing to sellers, but it also increases the buyer’s risk.

Working with an experienced real estate professional can help buyers navigate these decisions effectively. By understanding and leveraging contingencies, buyers can protect their interests and move forward with confidence in the home buying journey.

As always, if I can help you buy a home in Tacoma or anywhere in the Puget Sound, please text or call me at (206) 643-8845 or connect at www.erikmolzen@bhhsnw.com


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Location: Tacoma, WA, USA

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