How Often Do Contingent Offers Fall Through?

What is a contingent offer? 

A contingent offer is a purchase agreement that only moves forward if certain conditions are met. These conditions – called contingencies – act as safety nets, giving buyers protection if something doesn’t go as planned or issues are uncovered. If these conditions aren’t met, the buyer can back out of the deal without losing their earnest money deposit.

Example: Imagine buying a home built in the 1940s. You make your offer contingent on the electrical system being updated because knob-and-tube wiring is outdated and unsafe. If the inspection confirms the wiring hasn’t been updated and the seller refuses to fix it, the contingency allows you to walk away without penalty.

Common reasons contingent offers fall through

The reality is that most contingent offers make it to closing. But even with protections in place, some contingent offers can fall through due to:

• Financing issues: Changes in employment, debt, or credit during underwriting.
• Low appraisals: Buyers and sellers cannot agree on price adjustments.
• Inspection findings: Major repairs or safety concerns that the seller won’t address.
• Title problems: Liens, taxes, or property ownership disputes that aren’t easily resolved.
• Home sale delays: The buyer’s existing home doesn’t sell on time.

How key contingencies can impact the deal

Let’s walk through some of the common contingencies that get written into real estate contracts. These will give you a better idea of what to expect for your own homebuying or selling process.

Financing contingency

A financing contingency is one of the most common contingencies. It just means that the buyer’s offer is dependent on their lender approving their home loan.

Even if a buyer is pre-approved, lenders conduct a detailed underwriting process after a contract is signed. During this process, lenders verify income, credit history, employment, and debt-to-income ratios.

If something changes, like a new job or an increase in debt, the loan could be denied. In that case, the financing contingency allows the buyer to back out and recover their earnest money. While financing issues are one of the most common causes of delays, they aren’t the main culprit for a contingent offer falling through.

Appraisal contingency

An appraisal contingency ensures the home is worth the purchase price and protects both buyers and lenders. Before finalizing a mortgage, lenders require an independent appraisal to confirm they’re not lending above market value.

Appraisers consider factors such as:

• Square footage
• The home’s condition
• Location
• Recent sales of comparable homes

If the appraisal comes in low – say a $450,000 home appraises at $440,000 – the buyer can bring extra cash or ask the seller to reduce the price. If no agreement is reached, the buyer can walk away without penalty.

Appraisals are a common reason closings get delayed. NAR data shows appraisal issues caused about 6% of delays, making them one of the most important contingencies to watch, especially in markets where bidding wars push prices above value.

Inspection contingency

An inspection contingency lets buyers hire a professional to check the home’s condition, including the roof, foundation, plumbing, electrical, and HVAC. If major issues are found, buyers can request repairs, negotiate a credit, or walk away.

While most problems are minor, inspections can delay or even derail a deal. Notably, about 20% of buyers waived the inspection contingency in recent NAR surveys, often to make their offers more competitive.

Title contingency

The title of a home is essentially a record of its ownership. It shows who has owned it in the past, in addition to its current ownership. A title contingency ensures the home’s ownership is clear and free of legal claims. A title search can uncover liens, unpaid taxes, or disputes over property ownership.

If a problem arises that cannot be quickly resolved, the title contingency allows the buyer to step away from the contract. This is less common than financing or inspection issues, but it’s a critical safeguard that prevents a buyer from inheriting legal complications after closing.

Home sale contingency

For buyers who already own a home, a home sale contingency can provide breathing room. It gives the buyer a set period of time to sell their existing property before moving forward with the new purchase. If their current home doesn’t sell in time, they can walk away without losing their earnest money.

While this contingency protects buyers, it’s not very popular with sellers. From the seller’s perspective, it adds a layer of uncertainty. To make it more manageable, sellers sometimes include a kick-out clause or a first right of refusal. These clauses let sellers keep the home on the market and move forward with another offer if the original buyer can’t sell their home quickly enough.

Should you submit a contingent offer?

Contingencies are protections, not obstacles. They give you the option to back out or renegotiate if issues arise. Waiving them can be risky – without inspection, financing, or appraisal contingencies, you could face unexpected repairs, lost deposits, or covering appraisal gaps.

If you’re considering waiving, be sure your finances are strong and you understand the risks. A common compromise is shortening contingency timelines instead of removing them, which can make your offer more competitive while still providing protection.

FAQS: How often contingent offers fall through, and more

What happens if a contingent offer falls through?

If a contingency cannot be met, then the buyer can walk away from the deal and receive their earnest money back. Unless the seller has accepted a backup offer, the home will return to the market, and the seller will need to find a new buyer.

Does the market affect how often a contingent offer falls through?

It can. In a competitive market, buyers sometimes stretch financially to win a home, which can increase the risk of financing or appraisal issues. In balanced or slow markets, contingencies are more likely to be resolved successfully.

Will a seller accept a contingent offer?

Yes, but it depends on the market. In slower markets with fewer buyers, sellers are more likely to accept offers with contingencies. In competitive or seller’s markets, they may favor offers with fewer strings attached.

Can sellers back out of a contingent offer?

Technically, a seller can change their mind, but it’s rarely simple or without risk. Once a purchase agreement is signed, they’re legally bound to its terms. If they back out without a valid reason, they’ll usually need to return the buyer’s earnest money and could face legal or financial penalties.

Do contingent offers take longer to close?

They can. Standard contingency periods typically run anywhere from 10 to 30 days, depending on the type – such as inspection, appraisal, or financing. Each adds steps to the process, which can extend the closing timeline. That said, some buyers choose to shorten contingency deadlines to make their offer more appealing and keep the deal moving forward.

What’s the difference between a contingent offer and a pending sale?

A contingent offer means the deal is still waiting on certain conditions to be met. Once contingencies are resolved, the home moves to pending status, which is one step closer to closing.

>> Read more: What is Contingent vs. Pending? Find Out the Difference