How to Make a Contingent Offer to Buy a Home

You found a house that fits your budget and wish list, and now it's time to make an offer.

But questions remain. Is the property really worth the asking price? Are there hidden structural problems? Will your home loan application win final approval? Steps during the mortgage process — including an appraisal, a home inspection and underwriting — will provide answers, but in the meantime, you can include contingencies in your offer.

Making a contingent offer on a home

A purchase contract is legally binding, and breaking one can be costly. Making a contingent offer protects your interests in case unexpected issues mean you no longer can or want to buy the home. A contingent offer includes "walk-away" clauses, or "contingencies," that let you get out of the deal and retrieve your earnest money deposit if certain conditions aren't met.

Think of a contingency as an “if-then” proposition. For example: If the appraised value of the property is lower than the purchase price, then I can ask for a lower price or get out of the contract.

» MORE: Tips for first-time home buyers

When working with your agent to write the offer, you'll have to decide which contingencies to include. Your real estate agent can explain your options and make recommendations.

Although real estate contingencies protect your interests, be aware that too many stipulations in the contract can reduce the likelihood of the seller accepting your offer, especially in a tight market.

» MORE: Contingent vs. pending: What this means in real estate