In this short instructional video, Southwest Florida real‑estate agent Renee Hahn (Downing Fry Real Estate) explains the most common contingencies found in residential purchase contracts and why they matter. She outlines the primary financing contingency, emphasizing the difference between a pre‑qualification and a pre‑approval letter and how a mortgage underwriting process can affect contract performance. The second major contingency is the home‑inspection contingency, which gives the buyer a chance to verify the condition of the property before closing. Hahn also mentions less‑common add‑on contingencies such as a lawyer or accountant review and a “sell‑my‑current‑home first” clause. She briefly touches on escrow deposits, describing how the deposit is held, when it may be returned, and how compliance with contingencies protects the buyer’s money if the contract is terminated. The overall message is that contingencies are built‑in safety nets that let buyers back out without losing their deposit, provided the contract terms are followed.
Chapters
Hello, Southwest Florida! This is Renee Han with Downing Fry Real Estate. I service Southwest Florida, Naples, and surrounding areas. This is a series that I call Ask Renee. It's my opportunity to get some answers out there to the most commonly asked real estate questions that I encounter. So for today, the topic— and these are, by the way, intended to be very short segments— today's topic is is contingencies. So one question I get asked is, what kind of contingencies are involved in selling property? And that could be curiosity from sellers or buyers. The two most common contingencies, one being the financial contingency, and that's oftentimes when there is some kind of mortgage process involved. And so there's no guarantee until the mortgage process goes through underwriting that the person will be approved to, uh, get the funds through the mortgage to purchase the property. So that's a financing contingency. Um, those used to be really tough years ago. They're getting a little bit better now that some of the credit, um, and financing, um, guidelines have, have tightened. One of the things, if you're a buyer and you're interested in making an offer on a home, I always advise people, don't just bring a prequalification letter because all that's essentially saying is, you know, I've given them my information verbally and they think I would qualify, but rather bring a pre-approval letter, which is one step further into the process, which means that the mortgage companies have actually seen documents that are required to substantiate what you have, the information you've given them. So financial, financing contingency. The second most common contingency is the home inspection. So when somebody makes an offer, they're obviously doing so expecting that the house and all its contents that come with the purchase are in good working order. and so there is a contingency to allow the buyer an opportunity to perform or have a, an inspection performed to check out things. So those are two big contingencies that are built into most, but not all, contracts for the purchase of real estate property. Some of the others that you may encounter, one being a contingency to have a lawyer look at it. So there's an addendum that you can attach to allow you time to have a lawyer or an accountant look at it. Another type of contingency might be something that you've written into the contract to be able to sell another property first that's required to be able to then purchase this property. The whole point of contingencies, though, very briefly, is it's a point in the contract where a decision gets made that could influence whether the property ever gets— the, the offer and the property ever get to a final close. Now the other thing wrapped around that, and I'll do a separate video on this, but just briefly, is what happens to the deposit. So the deposit's put in escrow, and you know, as we go through the contract, where this tends to get a little dicey and emotions get involved is when somebody has backed out of the contract, whether it be the seller or the buyer, and they're trying to determine who gets all or part of that deposit. And the short answer is it depends on whether the contract was followed and if somebody, um, you know, pulled out in violation of the agreement. Typically, the contingencies are ways that you have to exit the contract and still be eligible to get your deposit back if you've complied and the sellers complied with all of the requirements. So that's a short but sweet explanation of the different kind of contingencies that you might find. And again, the whole point of contingencies is just to be able to give a buyer an opportunity to change their mind about purchasing the property and not jeopardize their deposit payment. Thanks for stopping by. I hope that you find these informative and that you check out a few more. Have a great day.
