Hey real estate newbees!

I know when you’re just starting out, the world of real estate can feel like it has its own language—contingencies, financing, inspections… the list goes on. Well, don’t worry, I’ve got your back! Today, we're diving into real estate contingencies—a crucial part of every deal, and something you’ll need to understand thoroughly to help your clients navigate the process smoothly.

I spent months learning the ins and outs of contingencies, and today, I’m breaking it down so you can grasp everything in a snap. By the end of this email, you'll know what contingencies are, why they matter, which ones are absolutely essential, and what happens if they aren’t met. Let’s dive in!

So, What Exactly Is a Real Estate Contingency?

A real estate contingency is a condition or requirement that must be met before a deal can go through. Think of it as a safety net for both buyers and sellers. They set expectations and protect parties from potential risks. For instance, if the buyer can’t get financing or the home fails the inspection, the contingency allows them to cancel the contract or renegotiate terms.

But here’s the thing—too many contingencies can make your client's offer look less attractive to sellers. It’s about finding the right balance!

Common Real Estate Contingencies You Need to Know About:

1. Financing Contingency: Protecting Your Loan Approval
   • This one’s a must-have if the buyer needs a mortgage. The financing contingency protects them in case their loan application gets denied after initial approval. Without it, they could lose their earnest money if the deal falls apart. Don’t skip this one!
2. Home Inspection Contingency: Protecting Your Buyer’s Investment
   • The inspection contingency allows the buyer to get a professional inspection done to identify any major issues like structural problems or faulty systems (plumbing, electrical, etc.). If there are significant issues, the buyer can ask the seller to fix them, lower the price, or back out of the deal.
3. Appraisal Contingency: Ensuring the Home’s Value
   • This one protects your buyer if the home’s appraisal comes in lower than the agreed purchase price. It’s often debated whether to waive it, but do NOT waive it if you're working with a first-time buyer! If the appraisal is lower than expected, your buyer has the option to renegotiate, cover the difference, or walk away from the deal without losing their deposit.
4. Home Sale Contingency: Selling Their Current Home First
   • This is for buyers who need to sell their current home before buying a new one. While this doesn’t apply to first-time buyers, it’s good to know about for future transactions. It can make the buyer's offer less appealing to sellers, so weigh the pros and cons carefully.
5. Title Insurance Contingency: Protecting Ownership
   • The title insurance contingency ensures that there are no legal issues with the property’s title (like unpaid taxes or old debts). While this is often required by the lender, it's always a good idea to make sure your client gets owner’s title insurance too.
6. Homeowners Insurance Contingency: Ensuring Protection
   • This contingency is vital to ensure your buyer can get insurance on the property. If they can’t get coverage (especially in areas prone to natural disasters), they can back out of the deal without losing their earnest money.

Why Should You Care About Contingencies?

Contingencies are there to protect both you and your clients. They help reduce risks and ensure that your clients don’t end up in a deal that isn’t right for them. However, too many contingencies can make an offer look less appealing to sellers, especially in competitive markets. As a new agent, understanding which contingencies are must-haves and which are optional is key to crafting a solid offer.

Here’s the Bottom Line:

As a new agent, the three must-have contingencies you should ALWAYS include in your contract are:

• Financing contingency
• Home inspection contingency
• Appraisal contingency

Skipping these can open up your clients to unnecessary risks!

That being said, each situation is unique. Some deals may require additional contingencies, while others may not need all three. The best course of action is to use this guide to understand the purpose of each contingency and discuss with your clients which ones make sense for their specific needs.

I hope this helps clear up what contingencies are and how to use them effectively in your real estate deals!

Until next time!