What Contingencies Should I Include in My Offer in Minnesota?
A buyer I worked with in Apple Valley last spring came to our offer strategy conversation with a printout he had made from an article he found online. The article listed seven contingencies that every buyer should include in every offer. He had highlighted all seven and wanted to include each one in the offer we were about to write on a home that had already received two other offers and where the seller had asked for highest and best. I did not tell him the article was wrong. Some of the contingencies it listed were genuinely important and we were going to include them. But the framing of every contingency in every offer misses something fundamental about how contingencies actually work in a real transaction. Contingencies protect buyers. They also have a cost. In competitive situations, a heavily contingency-laden offer is a less attractive offer than a leaner one, all else being equal. The art of crafting an offer with the right contingencies is the art of protecting yourself appropriately for your specific situation without making your offer unnecessarily unattractive to a seller who has other options. Understanding which contingencies to include, what each one does, and when it might make sense to modify or waive one is one of the most important skills a buyer develops through working with a knowledgeable Realtor. Here is a complete guide to the contingencies that matter most in Minnesota home purchases and how to think about each one. What a Contingency Actually Does Before getting into specific contingencies, it helps to be precise about what a contingency is and what it accomplishes. A contingency is a provision in your purchase agreement that makes your obligation to complete the purchase conditional on a specific event occurring or a specific condition being satisfied. If that condition is not met within the specified timeframe, you have the right to terminate the purchase agreement and, in most cases, receive your earnest money back. Contingencies protect buyers by creating defined exit ramps in the transaction, points at which you can make an informed decision about whether to proceed based on new information. Without contingencies, you are essentially agreeing to buy the home unconditionally from the moment your offer is accepted, regardless of what you discover about the property’s condition, your ability to finance it, or other relevant factors. The trade-off is that from a seller’s perspective, every contingency represents a way the deal can fall apart. Sellers prefer fewer contingencies because fewer contingencies mean more certainty that the transaction will actually close. In competitive markets, this creates pressure on buyers to minimize contingencies to make their offers more attractive. Navigating this tension is the core challenge of offer strategy, and the right answer depends on your specific financial situation, your risk tolerance, the specific property, and the competitive landscape you are operating in. The Financing Contingency The financing contingency is the single most important contingency for the vast majority of buyers and should be included in any offer made by a buyer who is financing their purchase with a mortgage. What it does is straightforward. If you apply for your mortgage in good faith and your loan is denied, the financing contingency gives you the right to terminate the purchase agreement and receive your earnest money back. Without it, a buyer who cannot obtain financing is still contractually obligated to close and faces losing their earnest money if they cannot. The financing contingency typically specifies the loan type you are applying for, the maximum interest rate you are willing to accept, and the number of days you have to obtain financing approval before the contingency expires. Some buyers in very competitive situations choose to waive the financing contingency, most commonly cash buyers who do not need a mortgage, but occasionally buyers who have rock-solid pre-approval situations and who are confident enough in their loan approval to accept the risk. For most buyers, waiving the financing contingency is not advisable. The protection it provides is too fundamental to give up without genuine justification. The Inspection Contingency The inspection contingency gives you the right to have the property professionally inspected within a defined window after offer acceptance and to make decisions based on what the inspection reveals. Within the inspection contingency window, which is typically five to ten business days in Minnesota transactions, you can have a licensed home inspector evaluate the property and provide you with a written report of their findings. Based on that report, you have several options. You can proceed with the purchase as agreed. You can request repairs or credits from the seller to address inspection findings. You can negotiate a price reduction. Or you can terminate the purchase agreement and receive your earnest money back. The inspection contingency is essential protection for buyers who are purchasing a home without extensive construction or home maintenance knowledge, which includes most buyers. Even buyers who are knowledgeable about homes benefit from an independent professional evaluation that documents the property’s condition in writing. In competitive markets, some buyers modify the inspection contingency rather than including it in its standard form. Common modifications include shortening the inspection window to show the seller the buyer can move quickly, including an inspection for informational purposes only clause that means the buyer will not request repairs but retains the right to walk away based on what is found, or in some situations waiving the inspection entirely. Waiving the inspection contingency is a significant decision with significant risk. Without an inspection, you have no professional evaluation of the property’s condition and no contractual basis to exit based on what you might discover later. For most buyers, particularly first-time buyers, waiving the inspection should be approached with extreme caution if at all. The Appraisal Contingency The appraisal contingency protects buyers when a home appraises for less than the purchase price. When you obtain a mortgage, your lender requires a professional appraisal to confirm that the property is worth what you are paying