Contingencies 101 in Bay Area Real Estate
If you have spent any time looking at Bay Area homes, you have probably heard the phrase, “You will need to waive contingencies to be competitive.” For most buyers, that line is enough to send a wave of panic.
Contingencies are your safety net. They are what give you room to back out of a deal if something big comes up. So why would anyone give them up? And how do you know when it is safe to do so?
These were all the questions I had when I was on the other side, before I became an agent. I am here to break it all down for you.
What contingencies are
A contingency is a condition that must be met for the purchase to move forward. If the condition is not met, you can walk away without losing your deposit.
The most common ones are:
• Financing contingency: protects you if your loan falls through
• Appraisal contingency: protects you if the home appraises lower than the purchase price
• Inspection contingency: gives you time to hire inspectors, do your own evaluation of the property, and review the results
• Sale of current home contingency: you agree to purchase the new home once your current one sells, which means the seller shares in that risk
Why they matter
Contingencies give buyers peace of mind. They are a built in pause button when everything feels like it is moving too fast.
And the truth is, with any of these contingencies in place, you essentially have a free pass to exit the contract during that period. It does not always have to tie directly to the specific contingency.
Why they often get waived here
In many parts of the country, it is normal to have 7 to 14 days for inspections, financing, and review. But contingencies add more time to a transaction and more risk to the seller. If a deal falls through, sellers lose momentum, and other buyers may start to see the property as a red flag.
That is why in the Bay Area, sellers go to great lengths to prepare a full disclosure packet upfront. It is not unusual for these packets to include dozens of documents such as inspection reports, natural hazard disclosures, title reports, HOA documents, and more, easily running 100 to 200 pages.
The idea is that buyers do their homework before writing an offer. If the home needs repairs, those are reflected in the disclosures and ideally in the price you offer. The expectation becomes that if you have already reviewed the reports, you do not need the safety net of contingencies.
Seller psychology in a competitive market
In multiple offer situations, it is rare to win with contingencies, even if your price is the highest. Sellers almost always favor certainty.
From the seller’s perspective, a home that goes into contract is essentially off the market. If a buyer backs out later, the seller has lost time, momentum, and sometimes money, all while the property starts to look like damaged goods in the eyes of other buyers.
That is why, in a bidding war, contingencies make your offer less attractive. They introduce doubt. Even if you are offering more money, the seller may choose a slightly lower but cleaner offer, because it gives them the peace of mind that the deal will actually close. In competitive situations, contingencies shift the leverage away from the buyer and toward the other offers on the table.
Contingency know how in the Bay Area
Waiving contingencies is not about being reckless. It is about being informed. And just because it is the norm in the Bay Area does not mean you should automatically waive them.
• Read the disclosure packet thoroughly - This is not just paperwork, it is where you build the confidence to know whether waiving is truly safe
• Ask questions - The biggest mistakes happen when buyers stay silent. If something feels off, trust your gut and get it clarified before you decide
• Lean on your lender - Certain properties, like condos or townhomes, can raise financing requirements. Your lender will know whether you need the safety of a financing contingency
• Check with your agent on value - For appraisal contingencies, your agent can help you weigh whether your price is supported by recent comparable sales, or if you are stretching beyond what the market will back
• Use the market to your advantage - When a property has been sitting for a while, sellers are much more open to contingencies. If peace of mind is worth it to you, those are the homes where you can often negotiate to keep them in
The bigger picture
At the end of the day, contingencies are the tug of war between two psychologies. Sellers want certainty. Buyers want peace of mind. The art is finding the balance between those two.
When you understand contingencies, you can decide from a place of clarity instead of fear, and that is the real advantage.
Contingencies are about understanding your risk, not about being “safe” or “bold.” Sometimes the smart move is to keep them. Sometimes the smart move is to waive them.
By the way, if you have not had a chance to fill out the survey I sent last week, please take a few seconds to provide your input.
I appreciate and value your feedback. As always thank you for reading.