Contingencies: What to Keep and What to Waive
A contingency is a condition that has to be satisfied before you are fully committed. While one is active, you can cancel and keep your deposit. Once it is removed — or if you never included it — backing out can cost you that deposit.
In a competitive market, buyers are routinely advised to waive them. Sometimes that is the right call. It should never be an automatic one.
Loan contingency
Protects you if your lender ultimately will not fund, even after a pre-approval. Pre-approval is not a guarantee; underwriting can turn up problems with the property, the appraisal, or your own file late in the process.
Waiving it means you are committed to buying even if your financing collapses. If you cannot close, your deposit is at risk. Only reasonable if you could complete the purchase in cash, or you are genuinely certain of your lender.
Appraisal contingency
Protects you if the home appraises below your offer price. Lenders lend against appraised value, so a low appraisal leaves a gap that has to be filled somehow.
Waiving it means you cover that shortfall in cash, on top of your down payment. This is the most commonly waived contingency in a bidding war, and the one that most often catches buyers short. Before waiving it, decide the exact number you could cover — and write your offer accordingly.
Inspection contingency
Your window to inspect the property and to cancel, or ask for repairs or credits, if something serious turns up. Structure, roof, plumbing, electrical, sewer laterals, pests.
Waiving it means buying as-is, including problems nobody has found yet. On a newer home in known condition this may be a manageable risk. On an older Southern California property — original plumbing, unpermitted additions, a sewer line nobody has scoped — it is the riskiest of the three to give up.
The middle ground buyers forget
Waiving is not the only way to make a contingency more attractive. Shortening it often achieves most of the effect while keeping the protection.
A seller comparing a 17-day inspection period against a 7-day one sees meaningfully less risk of the deal dragging. You still get your inspection; you just have to move quickly. Tightening timelines is usually the better first move.
Sale of your current home
If your purchase depends on selling a property you already own, that is a contingency sellers treat as the riskiest of all — your deal now depends on somebody else's deal.
If you can avoid needing it, avoid it. If you cannot, expect it to cost you somewhere else in the offer, and price that in deliberately rather than being surprised.
The bottom line
Every contingency you drop makes your offer more appealing and moves risk onto your side of the table. That trade is sometimes worth making. Make it as a decision, with a number attached, rather than as a reflex because someone told you it is what winning offers do.
General information for California home buyers, not legal or tax advice. Every transaction is different — consult an appropriate professional about your own situation.