Should I Waive Contingencies in a Hot Market?

The High-Risk Play: Contingency Removal

In a highly competitive California market like Los Angeles, waiving or shortening contingencies has become a common tactic to win bidding wars. Removing contingencies signals to sellers that you’re confident and committed, often making your offer stand out. However, this comes with significant risk—waiving a contingency means you lose the contractual right to cancel without forfeiting your Earnest Money Deposit (EMD). This means if a problem arises, you could lose thousands or tens of thousands of dollars or be forced to complete the purchase on unfavorable terms.

Contingency Risks & Rewards: A Breakdown

The Inspection Contingency

Risk: If you waive your inspection contingency, you agree to buy the home “as-is,” regardless of costly hidden defects such as roofing failures, mold infestations, or foundation damage. These issues can cost tens of thousands or more to repair, exposing you to major financial risk.
Strategy: Instead of waiving the inspection outright, consider performing a pre-offer inspection at your own expense. This allows you to accept the property condition upfront while safeguarding yourself from surprise defects, maintaining buyer protections without weakening your offer.

The Appraisal Contingency

Risk: The appraisal contingency protects you if the home appraises for less than the purchase price. Without it, you’re contractually bound to pay the difference—the “appraisal gap”—out of pocket. This can result in unexpected large cash demands after escrow opens.
Strategy: Use an appraisal gap clause in your offer, specifying a maximum dollar amount you’re willing to cover above the appraised value. For example, agreeing to pay up to $25,000 of the gap limits your exposure while keeping your offer competitive and seller-friendly.

The Loan/Financing Contingency

Risk: Waiving this contingency means you lose your EMD if your financing fails, such as due to unexpected income changes or underwriting issues. This is especially risky without a fully vetted loan approval.
Strategy: Only waive the loan contingency if you have a fully underwritten pre-approval and ample reserves to cover your EMD or an appraisal gap. This step should be discussed closely with your lender and only pursued when you’re confident in your financing situation.

Competitive Alternatives to Waiving Everything

• Increase Your Earnest Money Deposit: Offering a 3% or higher EMD signals strong financial commitment and gives sellers confidence without losing important contingencies.

• Shorten Contingency Timelines: Propose rapid inspection and appraisal periods—such as 7 days—demonstrating you are ready to move quickly while preserving protections.

• Offer Seller Rent-Back: Allow the seller to stay in the home post-closing for 30–60 days at no or reduced rent, easing their moving timeline and making your offer more attractive.

Waiving contingencies can increase your odds in a tight California market, but it also raises your financial risk substantially. Instead, a balanced approach—including selective waivers combined with strong financial signals and creative concessions—can help you win competitive deals while still protecting yourself from costly surprises.