What Contingencies Should I Include in My Offer in Minnesota?

Most Minnesota buyers who use a mortgage should include a financing contingency and an inspection contingency. From there, you add the ones that fit the property, such as appraisal, title, homeowners association, radon, well or septic. The right set depends on your finances, the home and how competitive the offer situation is.

What a contingency does

A contingency is a provision in your purchase agreement that makes your obligation to buy conditional on a specific event or condition. If the condition is not met within the stated timeframe, you have the right to end the agreement and, in most cases, receive your earnest money back.

Contingencies protect you by giving you defined points where you can decide whether to continue, based on new information. They also have a cost. To a seller, every contingency is one more way the sale could fall apart.

The financing and appraisal contingencies

The financing contingency is the most important one for most buyers. If you apply for your mortgage in good faith and the loan is denied, it lets you end the agreement and receive your earnest money back.

The appraisal contingency protects you when the home appraises for less than the purchase price. Your lender bases the loan on the appraised value, which can leave a gap between what you agreed to pay and what the lender will lend. With this contingency, you can end the agreement if the seller won't reduce the price to the appraised value.

Some buyers waive the appraisal contingency to strengthen an offer. Buyers who do that need enough available cash to cover a possible gap, so confirm the numbers with your lender first.

The inspection contingency

The inspection contingency gives you a set window after acceptance to have a professional home inspector evaluate the property and give you a written report. Your purchase agreement states how long that window is. After you read the report, you have four options.

• You can go ahead with the purchase as agreed.
• You can ask the seller for repairs or credits.
• You can negotiate a lower price.
• You can end the agreement and receive your earnest money back.

In competitive situations, some buyers shorten the window to show they can move quickly. Others inspect for information only, which means they won't ask for repairs but keep the right to walk away. Waiving the inspection entirely carries significant risk, and we urge extreme caution, especially for first-time buyers.

Contingencies tied to the property

• Title. This lets you exit if the title search finds a problem that can't be resolved before closing, such as an undisclosed lien or an ownership dispute. It is a standard inclusion in most Minnesota transactions.
• Homeowners association. This lets you review the governing documents, financial statements and meeting minutes. Those can reveal pending special assessments or restrictive rules. It matters most for condos.
• Radon. This lets you test for radon, a naturally occurring radioactive gas found at higher levels in many Minnesota homes. Testing matters most for homes with basements.
• Well and septic. If the property has a private well or a septic system, these let you have the water tested and the system professionally evaluated before closing.

If you need to sell your current home first

A sale of prior home contingency gives you a set period to sell your current home before you must close on the new one. Sellers find it one of the least attractive, because their sale then depends on a transaction they can't control.

Some buyers sell first and rent for a time. Others use a bridge loan or another financing strategy. Your lender can tell you which options fit.

How to choose the right set

• Your finances matter. A cash buyer doesn't need a financing contingency, and a buyer who doesn't own a home doesn't need a sale contingency.
• The offer situation matters. When a seller has several offers, including every possible contingency may make yours the least attractive.
• The property matters. A newer home in excellent condition may call for a different inspection approach than an older home with original systems.
• Your risk tolerance matters. Accepting more risk for a stronger offer is a fair choice when you understand that risk.

Read the specific language of each contingency in your purchase agreement, and track every expiration date. For legal questions about that language, confirm with a real estate attorney.

Common questions

Can I add a contingency after my offer has been accepted? Generally no. The purchase agreement is a binding contract once accepted, so a new contingency would need the seller's agreement.

What happens if I miss a contingency deadline? The contingency can expire even if the issue is not resolved. You may lose the protection it was meant to give you.

Can the seller refuse my offer because of my contingencies? Yes. A seller may choose an offer with fewer contingencies over a higher-priced one because it offers more certainty.

Is it ever smart to include no contingencies? Rarely. It can make sense for a cash purchase of a property the buyer has thoroughly evaluated. For most buyers with a mortgage, the risk is too high.

If you'd like help deciding which contingencies fit your offer, send us a message. You can also see how an offer fits into the full timeline on our buying process page.