Home Offer
Contingencies Explained
Contingencies protect you in a home purchase. Here's what each one does, how Texas handles them differently, and when to use (or waive) them in El Paso's market.
The 4 Main Contingencies
Financing Contingency
Protects the buyer if their mortgage loan is not approved. If the lender denies financing, the buyer can terminate and recover their earnest money. In Texas, the Third Party Financing Addendum defines the loan terms.
Inspection Contingency (Option Period)
Texas uses an 'option period' instead of a traditional inspection contingency. The buyer pays a small fee for the unrestricted right to terminate for any reason during the option period (typically 7–10 days).
Appraisal Contingency
If the home appraises below the purchase price, the buyer can renegotiate, cover the gap in cash, or terminate the contract and receive their earnest money back under the appraisal contingency.
Sale of Other Home Contingency
Allows buyers to make an offer contingent on selling their current home first. Sellers may accept a 'kick-out clause' allowing them to continue marketing and give the buyer 48–72 hours to remove the contingency.
Frequently Asked Questions
What is an option period in Texas?
The option period is a set number of days (buyer and seller negotiate, typically 7–10) during which the buyer can terminate for any reason and receive their earnest money back. The buyer pays a small option fee ($100–$500) for this right.
Should I waive contingencies to win in a competitive El Paso market?
It depends on your financial position. Waiving the financing contingency is only advisable if you're 100% certain of loan approval. Waiving the option period eliminates your ability to back out based on inspection results — it carries significant risk.
What is a kick-out clause?
If your offer includes a 'sale of other home' contingency, the seller may add a kick-out clause giving them the right to keep marketing. If they receive another offer, you typically have 48–72 hours to remove your contingency or let the seller proceed.
Can a seller back out of a contingency?
Sellers can negotiate contingency terms but cannot unilaterally remove buyer protections after contract execution. Once both parties sign, contingencies are contractually binding.
What happens to earnest money if I use a contingency to exit?
If you terminate during the option period or invoke a valid contingency (financing, appraisal), your earnest money is returned. If you simply change your mind after the option period without a valid contractual reason, you may forfeit your earnest money.
ProGen Real Estate · Josue R. Jimenez, Licensed Texas Real Estate Broker · TREC #619091 · (915) 691-1082