Contingencies 101: How to Reduce Risk and Stay Competitive in San Francisco
- Clay Gjevre
- 5 days ago
- 6 min read
by Clay Gjevre
In a competitive San Francisco housing market, it’s tempting to think the only way to win is to waive every contingency and hope for the best. But that’s how buyers lose sleep—and deposits. It’s also how sellers end up with shaky escrows that fall apart halfway to closing.
Used correctly, contingencies are not “deal killers.” They’re tools that help buyers and sellers manage risk, protect deposits, and still write (or accept) strong offers on SF homes for sale.
This guide breaks down the key contingencies in typical SFAR and CAR contracts and shows how to structure them so you can stay protected and competitive.
What Is a Contingency in a San Francisco Real Estate Contract? (Contingencies 101)
A contingency is a condition that must be satisfied for the contract to move forward. Until a contingency is removed in writing, buyers usually keep a safety net around their earnest money deposit (EMD).
You’ll also see terms like:
EMD (Earnest Money Deposit) – the good-faith deposit held in escrow
Liquidated damages – how deposit risk is defined in the contract
Notice to Perform – a formal notice giving one side a short deadline to meet a contingency, or risk cancellation
In both SFAR and CAR contracts, the pattern is similar: contingency period → written removal → close. Miss a deadline and ignore a Notice to Perform, and the other side may have the right to cancel.
The Big Three Buyer Contingencies
1. Inspection Contingency: The Love/Hate Chapter
Buyers love inspections. Sellers… not so much.
For buyers, inspections are how you:
Discover surprises before you’re fully committed
Request repairs
Negotiate a credit
Or, in some cases, cancel and walk away
In San Francisco real estate, smart sellers often do pre-inspections (general, roof, sewer, etc.) before going on the market. That compresses timelines, reduces unknowns, and gives buyers confidence to shorten or even waive their own inspection contingency if they’re comfortable with the reports.
If you’re buying, focus on:
Health and safety issues
Structural concerns
Major systems: foundation, roof, plumbing, electrical, heating
Instead of sending a long “honey-do” repair list, many successful buyers focus on a targeted credit for major items. That’s usually easier for sellers to say yes to—and more likely to keep the deal alive.
2. Appraisal Contingency: Valuation Risk & Gap Caps
The appraisal contingency is about value. The appraiser is there to protect the lender, and indirectly, the buyer.
If the appraised value comes in lower than the contract price, there are usually three options:
Renegotiate the price
Bridge the gap with extra cash
Cancel the contract if you’re protected by an appraisal contingency
In competitive situations, some buyers use an appraisal-gap clause with a ceiling, such as:
“If the property appraises low, we’ll bridge the gap up to $X.”
This tells the seller you’re serious, but it also caps how much extra cash you’re willing to bring in.
On the seller side, it helps to:
Prep a comp packet (recent comparable sales)
Make sure the appraiser has easy access
Be available to answer questions about upgrades and features
3. Financing Contingency: Get Pre-Underwritten, Not Just Pre-Approved
Financing contingencies protect buyers if the loan can’t be finalized on the agreed terms.
In a fast-moving San Francisco real estate environment, going beyond a basic pre-approval and getting pre-underwritten can make a huge difference. That means an underwriter—not just a loan officer—has reviewed your file.
Strong buyers will often:
Clear as many loan conditions as possible before writing an offer
Schedule the appraisal on Day 1
Use realistic timelines for loan approval and funding
Strong sellers will:
Tighten contingency dates where appropriate
Ask for regular updates from the buyer’s lender
Request that the lender call the listing agent to vouch for the file
Those lender-to-listing-agent calls often translate into smoother, faster closings with fewer surprises.
Title & Prelim: Quiet Risk in the Background
Title issues don’t show up in the living room—they show up in the paperwork.
The preliminary title report (“prelim”) shows:
Liens
Easements
Judgments
Recorded restrictions
For condos and TICs, it’s also important to understand whether there is pending litigation involving the building.
Buyers receive title insurance at closing, which helps protect against many future claims. Sellers can reduce risk and speed things up by ordering the prelim early, reviewing it, and dealing with any “weird” items before going on the market.
Buyer’s Home-Sale Contingency: When You Need to Sell to Buy
In hot markets, a buyer’s home-sale contingency is a tough ask. If you need one, you must show the seller you’re serious and organized.
That usually means:
Your current home is prepped, photographed, and priced correctly
The listing is live—or about to launch within days
Timelines are clear and realistic
Sometimes buyers avoid or shorten the home-sale contingency by using:
A bridge loan
A HELOC
A short rent-back from the seller
A kick-out clause that lets the seller accept a backup offer if you don’t perform
Sellers who accept a home-sale contingency should keep dates short and measurable, with clear milestones and check-ins.
Seller Disclosures: Where Smart San Francisco Sellers Win
In San Francisco, disclosures are where deals are often won or lost.
Standard seller documents include:
TDS (Transfer Disclosure Statement)
SPQ (Seller Property Questionnaire)
NHDS (Natural Hazard Disclosure Statement)
PCOR (Preliminary Change of Ownership Report – usually handled with title/escrow)
For condos and TICs, buyers will also want:
HOA budgets and reserve studies
Meeting minutes
CC&Rs and house rules
Any litigation information
For buildings with decks/ balconies, available SB 326 / SB 721 inspections and reports
Robust, well-organized disclosure packets give sellers leverage. They make it easier for buyers (and their agents) to move quickly and confidently, shorten contingency periods, and still feel protected.
Well-documented listings often close faster and with fewer credits requested at the end.
Risk-Reduction Playbook for Buyers in San Francisco
If you’re buying a home in San Francisco, here’s how to protect yourself and compete:
Keep inspection, shorten the timeline
Pre-book inspectors so you can move quickly
Use appraisal-gap clauses with a cap
Decide in advance how much extra cash you’re truly comfortable with
Get fully pre-underwritten
Don’t rely on a generic “pre-approval” letter
Map your timeline
Know what should happen by Days 3, 5, 7, and 14 of escrow
Before you write, decide which matters more on this purchase:time or money. Your contingency strategy should reflect that.
Risk-Reduction Playbook for Sellers in San Francisco
If you’re selling your home in San Francisco, you can reduce surprises and strengthen your negotiating position with the right prep:
Do pre-inspections (especially in older SF housing stock)
Complete disclosures before launch
Have a complete HOA packet ready Day 1 for condos/TICs
Order prelim early and resolve lien or title questions upfront
Build an offer matrix that compares:
Price
Cash to close
Contingency timelines
Appraisal-gap structure
Lender strength and communication
Instead of just countering on price, many experienced sellers counter for certainty: higher EMD, tighter dates, per-diem charges for delays, or a clean rent-back.
SFAR vs CAR: Same Logic, Different Labels
San Francisco uses SFAR forms, while other parts of California often use CAR forms. The paperwork looks different, but the logic behind contingencies is basically the same:
Written removals
Editable timelines
Local custom around disclosures and pre-inspections
In San Francisco, it’s common to see:
Strong upfront disclosure packages
Pre-inspections completed before going on the market
Buyers doing informational walk-throughs even when they’ve shortened certain contingencies
The form set is just the framework. Strategy matters more than the label.
24-Hour Action Steps
If you’re getting ready to buy or sell, here are simple steps you can take in the next day:
Buyers
Ask your lender about full pre-underwriting
Talk through appraisal-gap options and how much you’re comfortable bridging
Shortlist inspectors you can book on short notice
Sellers
Contact a San Francisco real estate agent to discuss pre-inspections
Order a preliminary title report
Start gathering disclosures, HOA docs, and maintenance records
When to Talk to a San Francisco Top Agent About Your Contingencies
Contingencies are where risk, money, and timing all collide. The right strategy depends on:
Your timeline (how quickly you need to move)
Your financial comfort zone
How competitive your specific segment of the San Francisco real estate market is right now
If you’re wondering, “Should I wait to sell?” or “How do I structure contingencies without scaring off the other side?”, that’s the moment to get professional guidance.
Working with a San Francisco top real estate agent who understands both SFAR and CAR contracts—and how local buyers and sellers actually behave—can make all the difference.
For tailored advice on How to sell a house in San Francisco, how to structure contingencies on your next purchase, or just to sanity-check an offer you’re considering, reach out to Clay Gjevre real estate and schedule a strategy call. A short conversation before you sign can save a lot of stress (and money) later.
(Contingencies 101)
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Clay Gjevre San Francisco Realtor®
Vantage Realty
DRE 02099237
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