Process
Contingency
A condition in a purchase agreement that must be met for the sale to proceed — commonly financing, inspection, and appraisal — protecting the buyer's earnest money.
What does contingency mean?
Contingencies are the escape hatches in a purchase agreement. If a contingency isn't met, you can usually cancel and recover your earnest money.
- Financing: you must secure the loan
- Inspection: the home must pass your review
- Appraisal: it must value at or above the price
In hot Michigan markets, buyers sometimes waive contingencies to win a bidding war — a real risk, since waiving the appraisal contingency means covering any shortfall in cash. A strong pre-approval lets you keep protective contingencies while still competing.
A Michigan example
You offer $300,000 with an appraisal contingency, and the home appraises at $285,000. Because you kept the contingency, you can renegotiate or cancel and get your earnest money back instead of paying the $15,000 gap.
Common questions
What is an inspection contingency?
It lets you have the home professionally inspected and cancel or renegotiate if serious problems surface — a bad roof, foundation cracks, or failing systems. It protects you before you're locked into buying a home with costly hidden issues.
Related terms