You're getting ready to make an offer on a home, and your agent starts talking about contingencies. Inspection contingency. Mortgage contingency. Maybe another contingency specific to your purchase.

First, Understand That Your "Offer" Is a Contract

In everyday conversation, you'll hear us say things like, "Let's write an offer." That language can make it sound as though you're simply proposing a price and nothing becomes official until you sign the Purchase and Sale Agreement later.

That's an important misconception to clear up.

The Contract to Purchase, commonly called the offer, is an actual contract. Once it has been properly accepted, you have made a contractual commitment to purchase the property according to the price, dates, contingencies and other terms contained in that agreement. The Purchase and Sale Agreement that generally follows is a more detailed contract, but you shouldn't think of the initial offer as a casual placeholder until you get to the P&S. That's also why we want you to understand your contingencies before you sign the offer.

Contingencies Are Part of the Contract You're Making

A contingency is a condition written into your agreement that addresses what happens if a particular requirement isn't satisfied. For example, your contract may contain provisions concerning your home inspection or your ability to obtain mortgage financing.

These aren't informal understandings that you can sort out later. The wording, dates and requirements matter because they're part of the contract you've signed. So when we sit down to prepare an offer with you, we're doing much more than deciding: "How much should we offer?"

We're also discussing: What exactly are you agreeing to if the seller says yes?

Why Do Contingencies Matter?

When a seller accepts your offer, you've entered into an agreement to purchase the property. Contingencies establish certain conditions around that agreement.

They aren't simply a way to "get out of" buying a home if you change your mind. Each contingency has specific terms, deadlines and requirements that matter. Your rights depend on the language in the agreements you've signed and whether you've complied with those requirements. That's one reason we want buyers to understand their contingencies before making an offer, not after.

What Is a Home Inspection Contingency?

A home inspection contingency gives you an opportunity to have the property professionally inspected and determine whether you're comfortable moving forward based on the inspection results.

In Massachusetts, buyers of most residential properties now have important protections regarding home inspections. A seller generally cannot condition acceptance of your offer on your agreeing to waive or limit your right to obtain a home inspection. You must also receive a separate disclosure explaining that right. Certain transactions are exempt from these rules.

You aren't required to actually have an inspection simply because you have the right to one. That's your decision. If you choose to have an inspection, the terms and timing matter. The parties may agree to reasonable parameters surrounding the inspection, so make sure you understand exactly what you've agreed to.

What Is a Mortgage Contingency?

If you're financing your purchase, your Contract to Purchase, and Purchase and Sale Agreement, will typically address your mortgage financing. A mortgage contingency generally makes your obligation to purchase subject to your obtaining financing under the conditions described in the agreement.

This is different from being pre-approved. A pre-approval is an important first step, but the lender still has work to do after you have an accepted offer. Your application goes through underwriting, the property itself becomes part of the lender's evaluation, and additional documentation may be required.

The mortgage contingency will contain important terms and deadlines. Pay attention to them. If your lender asks for a document, send it promptly. Stay in communication with your lender, agent and attorney. And don't assume that a financing problem automatically means you can simply cancel the transaction and receive your deposit back.

The language and deadlines in your contract matter.

Are Those the Only Contingencies?

No.

Massachusetts recognizes that buyers and sellers may agree to other contingencies as part of a real estate contract. Depending on the property and the buyer's circumstances, an offer could involve additional conditions. That's why there isn't one perfect set of contingencies that belongs in every offer.

The right question isn't: "What contingencies does everybody use?"

It's: "What contingencies make sense for me, this property and this transaction?"

Do Contingencies Make My Offer Weaker?

This is where buyers sometimes become nervous. An offer isn't only a price. Sellers may consider the entire package, including contingencies and other terms.

That doesn't mean the goal should be to eliminate every protection possible. The goal is to understand the tradeoffs you're making.

When we prepare an offer, we'll talk about what each contingency does, why it might matter in your situation and how the terms of your offer could affect both your protection and the seller's evaluation of it. Then you decide what you're comfortable offering.

Deadlines Matter

This may be the least exciting part of contingencies and one of the most important.

They have deadlines. Your inspection may need to occur within an agreed period. Your mortgage commitment may be due by a particular date. Certain notices may need to be given in a particular way and within a particular timeframe.

Missing a contractual deadline can affect your rights. Once you're under agreement, there will be several people helping keep the transaction moving, including your real estate agent, lender and attorney. But when someone asks you for something, don't put it in the "I'll deal with that next week" pile.

What Happens If a Contingency Isn't Satisfied?

That depends on the contingency and the language of your contract. In some circumstances, you may have the right to terminate the transaction.

In others, there may be an opportunity to negotiate or resolve the issue. And if contractual requirements or deadlines haven't been followed, the answer can be different.

This is exactly why your Massachusetts real estate attorney is an important part of your team. Your agent can explain the practical real estate process, but your attorney is the person to advise you about your legal rights and obligations under your contract.

Don't Be Afraid to Ask What You're Agreeing To

There are going to be a lot of unfamiliar words when you buy a home. You aren't expected to arrive knowing all of them.

Before you submit an offer, you should understand more than: "We're offering $450,000." You should also understand the conditions you're including, the important deadlines and what happens next if the seller accepts. If you hear the word "contingency" and aren't sure what it means in your particular offer, ask.

Actually, ask again if you need to. You should never be embarrassed to ask what something means before signing a contract to buy a house.

Contingencies aren't just real estate vocabulary. They're part of the agreement you're making, and understanding that agreement is one of the most important parts of making an informed offer.