The Hidden Dangers of Waiving Contingencies: What Every Homebuyer Should Know
In a hot real estate market, buyers often feel pressure to make their offer stand out. One common tactic is waiving contingencies—the built-in protections in a purchase contract that allow you to back out (or renegotiate) if certain conditions aren’t met.
It might seem like a bold way to win the house, but it can also expose you to serious financial and emotional risk. Before you decide to waive, it’s crucial to understand what these contingencies do and what happens if you give them up.
1. Financing Contingency: Your Financial Safety Net
What it is: The financing contingency protects you if your mortgage loan doesn’t get approved. Even after pre-approval, unexpected issues can derail the final underwriting process—like a change in your job, new debt on your credit report, or an appraisal that comes in lower than expected.
What happens if you waive it: If your loan gets denied and you don’t have this contingency in place, you could lose your earnest money deposit—often thousands, or even tens of thousands, of dollars. Worse, the seller could pursue legal action for breach of contract if they feel financially harmed by your withdrawal.
Bottom line: Only waive your financing contingency if your loan is fully approved, your employment and credit are rock solid, and you could still close even if something unexpected pops up.
2. Appraisal Contingency: Protecting You From Overpaying
What it is: The appraisal contingency ensures the home’s appraised value supports the purchase price. Lenders won’t finance more than a property’s appraised worth—so if the appraisal comes in low, you either renegotiate, make up the difference in cash, or walk away (if you kept the contingency).
What happens if you waive it: Waiving this means that if the home appraises below your offer, you’ll need to cover the shortfall out of pocket. For example, if you agreed to pay $500,000 but the appraisal comes in at $470,000, you’re responsible for the $30,000 gap.
Bottom line: You might consider waiving this only if you have ample cash reserves and absolute confidence in the property’s value. Otherwise, a low appraisal can put you in a financial bind before you even move in.
3. Inspection Contingency: The One You Should Never Waive
What it is: This contingency allows you to inspect the home’s condition before finalizing the sale. It covers structural integrity, roof, plumbing, electrical systems, foundation, and potential hidden issues like mold or termites.
What happens if you waive it: Without it, you’re accepting the home “as is.” If you later discover a major issue—say, a cracked foundation or an outdated electrical panel—you’re stuck paying for repairs yourself. And these aren’t small bills; some can easily reach five figures.
Bottom line: Even in a bidding war, never skip the inspection. A house can look perfect on the surface but hide costly surprises underneath. You can always agree to a shorter inspection period or limit repair requests if you want to stay competitive—but always inspect.
Why Some Buyers Still Waive Contingencies
Sometimes buyers feel forced into waiving contingencies because they’re competing with multiple offers. In certain markets, sellers expect “clean” offers with minimal conditions. But keep in mind—every waived protection shifts risk away from the seller and onto you.
If you’re considering waiving, talk it through with your loan officer and your real estate agent first. A strong pre-approval, flexible closing timeline, or slightly higher offer price can often make your offer stand out without sacrificing your safety nets.
Final Thoughts
Buying a home is one of the biggest financial decisions of your life. Contingencies aren’t obstacles—they’re protection mechanisms designed to keep your dream home from becoming a financial nightmare.
Waive only when there’s true certainty:
- Your financing is rock solid.
- You’re prepared to handle a low appraisal.
- You’ve inspected the property and know exactly what you’re buying.
Everything else? Keep your safety nets intact. Winning the house isn’t worth losing your peace of mind—or your savings.
As a lender my role goes beyond helping you qualify for a mortgage. I help you understand your options, avoid costly mistakes, and make confident decisions that support your long-term goals.
Have a specific question about your situation? Feel free to reach out to me at 312-296-4175 or email me at connect@borislending.com. I lend in all 50 states and I am never too busy for your referrals!!
I have been in the mortgage industry since 1997 and I understand the anxiety that comes with making the most expensive investment of a lifetime. My objective is to be your advisor, to educate you and to make the mortgage loan transaction as transparent and as stress-free as possible. I enjoy establishing personal connections and work mostly by referral. I thoroughly explain the process and available options, and guide my clients to make choices that best fit their needs and financial goals. Once the underwriting begins I communicate regularly and keep my clients apprised of the loan status from the beginning through the end. My relationship with clients does not end at the closing table. You are my client for life and I am always available to answer your questions and provide you with guidance.