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  • Writer's pictureChris Goff

Real Estate Contract Contingency Clauses: For All Real Estate Investors

Real estate investments are akin to navigating a complex labyrinth, where each turn and decision could lead to new opportunities or unexpected challenges. Among the most powerful tools at an investor's disposal are contingency clauses in real estate contracts. These real estate contract contingency clauses serve as safeguards, allowing investors to mitigate risks and protect their interests throughout the purchase process. For both seasoned and novice real estate investors, understanding and leveraging these contingencies are crucial in making informed decisions that align with their investment strategies and goals.

The Essence of Real Estate Contract Contingency Clauses

Contingency clauses in real estate contracts are conditions that must be met for the transaction to proceed. They provide a way for buyers to back out of a contract without penalty under specific circumstances. Here are key contingencies real estate investors should consider:

1. Inspection Contingency

This clause allows buyers to have the property inspected within a specified period. It's essential to identify any issues that could affect the property's value or lead to significant expenses down the line.


"Buyer shall have the right, at Buyer's sole expense, to inspect the Property within [X] days after the effective date of this Agreement. If Buyer, in Buyer's sole discretion, is not satisfied with the condition of the Property, Buyer may terminate this Agreement by written notice to Seller before the expiration of the inspection period, whereby any earnest money deposited by Buyer will be promptly refunded."

2. Financing Contingency

A financing contingency gives buyers a way out if they’re unable to secure financing under the terms outlined in the agreement. This is particularly important in volatile markets where loan approval criteria can shift rapidly.


"This Agreement is contingent upon Buyer obtaining a written commitment for financing on terms acceptable to Buyer within [X] days after the effective date of this Agreement. If such financing cannot be obtained within the specified time frame, Buyer may terminate this Agreement by written notice to Seller, and any earnest money deposited by Buyer will be returned in full."

3. Title Contingency

Ensuring a clear and marketable title is paramount. This contingency protects the buyer from future legal issues related to property ownership.


"This Agreement is contingent upon Buyer receiving and approving a title insurance commitment that shows marketable title to the Property, subject to standard exceptions. If the title is found to be unsatisfactory in Buyer's sole discretion, Buyer may terminate this Agreement by written notice to Seller, resulting in a full refund of Buyer's earnest money deposit."

4. Appraisal Contingency

This condition ensures that the property's appraised value is at least equal to the purchase price. It is a safeguard against overpaying for a property.


"This Agreement is contingent upon the Property being appraised at or above the agreed-upon purchase price. If the appraisal value is less than the purchase price, Buyer has the option to either terminate this Agreement by written notice to Seller and receive a refund of the earnest money or renegotiate the purchase price with the Seller."

5. Assignment Contingency

For investors looking to engage in wholesaling or who may need to transfer their interest in the property to another party, this clause is critical.


"Buyer reserves the right to assign this Agreement to another party prior to closing without the consent of the Seller. The assignee shall assume all of Buyer's rights and obligations under this Agreement. Buyer shall notify Seller in writing of any such assignment."

6. Due Diligence Contingency

It allows investors to thoroughly investigate the property and all related aspects, including zoning, land use, and environmental conditions.


"Buyer's obligations under this Agreement are contingent upon Buyer’s due diligence investigation of the Property, including but not limited to zoning, land use, environmental conditions, and compliance with local laws. Buyer has [X] days to complete this investigation. If Buyer is dissatisfied with the results, for any reason or no reason, Buyer may terminate this Agreement by written notice to Seller, and Buyer's earnest money shall be refunded in full."

7. Closing Date Contingency

This clause provides flexibility on the closing date, accommodating delays that can often occur in real estate transactions.


"Both parties agree to close on or before [specified date]. If either party cannot close by this date due to circumstances outside their control, they must provide written notice to the other party, and both parties may agree to extend the closing date by up to [X] days."

8. Earnest Money Return Contingency

Should the deal fall through due to any of the contingencies, this ensures the buyer’s earnest money deposit is returned, minimizing financial loss.


"In the event this Agreement is terminated under the provisions of any of the aforementioned contingencies, all earnest money deposited by Buyer shall be immediately returned to Buyer without demand or penalty."

9. Subject to My Financial Partner's Approval

For those whose purchase power hinges on the approval of financial partners or investors, this contingency is a necessary inclusion to protect all parties involved.


"This Agreement is contingent upon the approval of Buyer's financial partner(s). Buyer shall present the terms of this Agreement to their financial partner(s) within [X] days after the effective date of this Agreement for approval. Should the financial partner(s) disapprove of the purchase for any reason, Buyer may terminate this Agreement by written notice to Seller within [Y] days of the effective date of this Agreement, and any earnest money deposited by Buyer shall be promptly refunded in full."

Strategic Application of Contingencies

To effectively utilize contingency clauses, real estate investors must consider their specific situation and investment goals. These clauses should be seen as tools to manage risk rather than obstacles to closing a deal. When drafting a purchase agreement:

  • Be Specific: Clearly define the conditions and timelines of each contingency to avoid ambiguity and potential disputes.

  • Understand the Market: In a seller’s market, too many contingencies might make an offer less attractive. Strike a balance between protection and competitiveness.

  • Communicate: Open dialogue with sellers about the purpose and necessity of each contingency can foster mutual understanding and facilitate negotiations.


Contingency clauses are indispensable in the real estate investment landscape, providing a framework for risk management and decision-making. By thoughtfully incorporating these clauses into real estate contracts, investors can safeguard their interests, ensuring that each investment moves them closer to their long-term objectives. Whether you're a seasoned investor or just starting, mastering the use of contingency clauses will undoubtedly be a valuable asset in your real estate investment toolkit.


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