Contingencies are contractual conditions that must be met for a real estate transaction to close. They are designed to protect both parties, but in a competitive market like San Mateo County, how you handle contingencies can determine whether your offer wins or loses. Here is what you need to know.
The Three Main Contingencies
Inspection Contingency
This gives the buyer a specified period, typically seven to seventeen days, to conduct property inspections and either accept the findings, negotiate repairs or credits, or cancel the transaction. In San Mateo County, where many homes are fifty to one hundred years old, inspections routinely reveal issues ranging from outdated electrical panels to minor foundation settling.
Appraisal Contingency
When a buyer uses financing, their lender orders an independent appraisal to confirm the property's value supports the loan amount. If the appraisal comes in below the purchase price, the appraisal contingency allows the buyer to renegotiate or withdraw. In a hot market where homes sell significantly above asking, appraisal gaps are common.
Loan Contingency
This protects the buyer if their financing falls through despite being pre-approved. Loan contingencies typically run seventeen to twenty-one days, allowing time for the lender to complete underwriting and issue final loan approval.
The Competitive Reality on the Peninsula
In many San Mateo County transactions, particularly for homes that attract multiple offers, buyers routinely waive one or more contingencies to strengthen their offer. The most commonly waived is the inspection contingency, especially when the seller provides comprehensive pre-listing inspection reports.
Waiving contingencies is not without risk. A buyer who waives the appraisal contingency may need to cover an appraisal gap with additional cash. A buyer who waives inspections assumes responsibility for any issues discovered after closing.
Advice for Buyers
Before waiving any contingency, understand exactly what you are giving up. Work with your agent to assess the risk based on the specific property and disclosure package. In many cases, completing inspections before submitting your offer allows you to waive the inspection contingency confidently because you already know what you are buying.
- Pre-offer inspections are standard practice on the Peninsula and cost a few hundred dollars. This investment can save you from waiving blindly.
- Appraisal gap coverage should be budgeted if you plan to waive the appraisal contingency. Know your maximum comfortable exposure.
- Strong pre-approval letters from reputable local lenders reduce the risk associated with shorter loan contingency periods.
Advice for Sellers
As a seller, the strength of an offer is not just about price. An offer with fewer contingencies and shorter timelines reduces your risk and gets you to closing faster. When evaluating multiple offers, I help my clients weigh the total package: price, terms, contingencies, financing strength, and the buyer's track record.
Whether you are buying or selling in San Mateo County, navigating contingencies requires experience and strategic thinking. I am here to guide you through every decision with clarity.