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 for it. If the appraisal comes in below the purchase price, your lender will only base your loan on the appraised value, creating a gap between what you agreed to pay and what your lender will lend.
An appraisal contingency gives you the right to terminate the purchase agreement if the home appraises below the purchase price and the seller will not reduce the price to the appraised value. Without this contingency, if the appraisal comes in low, you either have to make up the difference in cash, negotiate a reduction with the seller without a contractual right to walk away, or lose your earnest money if you cannot close.
In competitive markets, some buyers waive the appraisal contingency as a way to make their offer more attractive, particularly when they are offering above asking price. Buyers who waive the appraisal contingency need to have sufficient liquid assets to cover a potential appraisal gap and should do so with a clear understanding of the financial risk they are accepting.
The Sale of Prior Home Contingency
The sale of prior home contingency is relevant for buyers who currently own a home and need the proceeds from selling it to fund the purchase of the new one.
This contingency gives the buyer a specified period to sell their current home before being obligated to close on the new purchase. If the current home does not sell within that window, the buyer can terminate the purchase agreement without losing their earnest money.
From a seller’s perspective, this is one of the least attractive contingencies to accept, because it makes the sale of their home dependent on an entirely separate transaction that they have no control over. In competitive markets, offers with sale of prior home contingencies are frequently at a significant disadvantage relative to offers without them.
Buyers who need to sell before buying sometimes address this by selling their current home before making offers on a new one, even if it means renting temporarily for a period. This eliminates the contingency entirely and allows them to present cleaner offers. Others use bridge loans or other financing strategies that allow them to close on the new home before selling the old one. Your Realtor can help you evaluate the right strategy for your specific situation.
The Title Contingency
The title contingency gives buyers the right to exit the purchase if a title search reveals issues with the property’s title that cannot be resolved before closing.
Title issues, which can include undisclosed liens, ownership disputes, errors in public records, or other encumbrances on the property’s title, can sometimes surface during the title search process. Most title issues are resolvable, and the title company handling your closing will work to clear them before closing. But in some cases, a title issue is serious enough that the buyer would not want to proceed.
In most Minnesota transactions, the title contingency is a standard inclusion because it protects against a genuinely serious risk without typically making the offer less competitive. Sellers who have clean titles and who are confident in their ownership history have nothing to lose from including it.
The Homeowners Association Contingency
If you are purchasing a property that is part of a homeowners association, an HOA contingency gives you the right to review the association’s governing documents, financial statements, meeting minutes, and other relevant materials and to exit the purchase if you find something in those materials that you are not willing to accept.
HOA documents can reveal pending special assessments that would require you to pay additional funds for upcoming repairs or improvements, financial instability in the association’s reserves, restrictive rules that would affect your ability to use the property the way you intend, or other material information about the community.
For condo purchases in particular, where the HOA’s financial and operational health directly affects the value and livability of your unit, this contingency is important protection that is worth including.
Radon and Well and Septic Contingencies
Minnesota has some specific property-related contingencies that are worth knowing about depending on the type of property you are purchasing.
Radon testing contingencies give buyers the right to have the property tested for radon, a naturally occurring radioactive gas that is present at elevated levels in many Minnesota homes due to the state’s geology, and to address any findings before closing. Minnesota has one of the highest rates of elevated indoor radon levels in the country, and radon testing is particularly important for homes with basements.
If the property has a private well rather than city water, a well water quality contingency allows the buyer to have the water tested and to address any water quality issues before closing. Similarly, if the property has a septic system rather than city sewer, a septic inspection contingency allows the system to be professionally evaluated before the purchase is finalized.
These contingencies are standard inclusions for properties where they apply and are not typically controversial with sellers because they address genuine health and safety concerns.
How to Think About Contingency Strategy
The right set of contingencies for your offer depends on several factors working together.
Your financial position affects which contingencies are essential. A cash buyer does not need a financing contingency. A buyer with strong liquid assets and a high confidence level in their appraisal may be able to thoughtfully waive the appraisal contingency. A buyer who does not own a current home does not need a sale contingency.
The competitiveness of the specific offer situation affects which contingencies you can include while remaining competitive. In a situation with multiple offers, including every possible contingency may make your offer the least attractive of a strong field. Your Realtor’s job is to help you understand what the competitive landscape looks like and what modifications, if any, might make sense given your specific situation.
The specific property affects which contingencies are most important. A newer home in excellent condition may warrant a different inspection approach than a fifty-year-old home with original systems. A condo in a large complex warrants a careful HOA review that a single-family home in a community with minimal HOA involvement does not.
Your personal risk tolerance is a genuine factor. Some buyers are comfortable accepting more risk in exchange for a more competitive offer. Others are not, and both are legitimate positions. What is not appropriate is accepting risk without fully understanding what that risk means financially and practically.
Common Mistakes Buyers Make About Contingencies
Including contingencies they do not fully understand, which means they do not know how to use them or when they expire.
Waiving contingencies under competitive pressure without fully understanding the financial risk they are accepting.
Not reading the specific language of each contingency in their purchase agreement to understand exactly what it covers and for how long.
Assuming that a standard contingency provides more protection than it actually does without reading its specific terms.
Not discussing contingency strategy with their Realtor before submitting any offer, which leads to either overprotecting in competitive situations or underprotecting in situations where protection was genuinely needed.
Practical Tips for Minnesota Buyers
Always include a financing contingency if you are obtaining a mortgage. This protection is too fundamental to waive without exceptional justification.
Always include an inspection contingency unless you have a specific, well-reasoned strategy for why it makes sense to modify or waive it in a particular situation.
Discuss the appraisal contingency with your Realtor in the context of the specific offer price and the current market to evaluate whether including, modifying, or waiving it makes sense for your situation.
Review the specific language of each contingency in your purchase agreement rather than relying on a general description of what it does.
Make sure you know the expiration dates of every contingency in your purchase agreement and track them actively throughout the transaction.
Frequently Asked Questions
Can I add a contingency after my offer has already been accepted?
Generally no. The purchase agreement is a binding contract once accepted, and adding new contingencies after acceptance would require the seller’s agreement to modify the contract. Contingencies need to be part of the original offer or negotiated before acceptance.
What happens if I miss a contingency deadline?
Missing a contingency deadline can result in the contingency expiring even if the condition it was meant to address has not been fully resolved. For example, if your inspection contingency expires before you have received and reviewed the inspection report, you may lose the protection it was meant to provide. Tracking contingency deadlines is critically important.
Can the seller refuse to accept my offer because of my contingencies?
Yes. Sellers can reject offers for any reason, including because they find the contingencies too burdensome. In a multiple-offer situation, a seller may choose a less contingency-laden offer over a higher-priced offer with more contingencies because they value certainty over maximum price.
Is it ever smart to include no contingencies?
In rare situations, typically cash purchases of properties the buyer has thoroughly evaluated, including no contingencies can make strategic sense. For most buyers, particularly first-time buyers with mortgage financing, including no contingencies exposes them to risks that are not appropriate to accept.
Final Thoughts
The buyer in Apple Valley and I had a genuinely good conversation about his printout before we wrote the offer. We included the financing contingency and the inspection contingency, both of which were essential for his situation. We modified the inspection contingency to shorten the window from ten days to seven to show we could move efficiently. We included the radon contingency because the home had a finished basement and he wanted that evaluation.
The offer was accepted. His inspection went smoothly. His loan was approved. He closed on time.
The right contingencies were in that offer. Not all seven from the article. The ones that genuinely protected him in his specific situation, crafted to be as competitive as possible while still doing their job.
That is the goal. Not maximum protection regardless of cost. Appropriate protection for your specific situation, understood clearly before you commit to anything.
Lesley The Realtor helps Minnesota buyers craft offers that are both competitive and well-protected, with the market knowledge and honest guidance that makes the difference between an offer that wins and one that loses for the wrong reasons.
Visit https://buy.dreamhomesminnesota.com/ to start the conversation.