What Contingencies Should You Include in a Florida Real Estate Contract?

What Contingencies Should You Put in Your Florida Real Estate Contract -- and What Happens If You Leave Them Out?

Why Contingencies Matter More Than Most Buyers Realize

A real estate contract is a legally binding agreement, and once you are under contract in Florida, your earnest money deposit is at risk if you walk away without cause. Contingencies are the clauses that give you cause -- legal, defined circumstances under which you can exit the contract and get your deposit back.

In a balanced market, contingencies are standard and expected. In a competitive market like St. Johns County has been over the past several years, sellers and their agents sometimes push buyers to reduce or waive them to make offers more attractive. Understanding what each contingency does -- and what the real cost of removing it is -- lets you make informed decisions rather than reactive ones under pressure.

Here is a plain-language breakdown of the three contingencies that matter most in a Northeast Florida transaction.

The Inspection Period (The Most Important Contingency)

Under the Florida AS-IS contract, buyers have a specified number of days after the effective date to conduct any inspections they choose -- general home inspection, roof inspection, HVAC inspection, pest inspection, pool inspection, sewer scope, and more. During this window, the buyer can cancel the contract for any reason, or for no reason at all, and receive their full deposit back.

This is why the Florida AS-IS inspection period is often called a "free look" period. It is an extraordinarily broad protection. You do not need to document a specific defect. You do not need to negotiate repairs (the seller is selling the home "as-is" -- meaning they are not obligated to fix anything). You simply decide, within the defined window, whether you want to proceed.

What happens if you find something significant? You have several options:

• Proceed as planned and accept the condition of the home
• Negotiate a price reduction to account for repair costs (this is separate from demanding repairs -- the seller can say no, but many will negotiate)
• Cancel the contract within the inspection period and get your deposit back

The inspection period is typically 10 to 15 days in most Northeast Florida transactions, though it is negotiable. Some buyers in competitive offers have reduced theirs to 5 or 7 days to appear more attractive -- this is acceptable if you can line up inspectors quickly. Waiving the inspection period entirely is a very different matter, and one I rarely recommend to buyers in this market.

The Financing Contingency

If you are obtaining a mortgage, the financing contingency (also called the loan approval contingency) protects you if your lender cannot approve your loan before closing. Under the standard Florida contract, this contingency gives you a specified number of days to secure a written loan commitment from your lender.

If your financing falls through for reasons outside your control -- a change in interest rates that pushes your debt-to-income ratio out of qualifying range, an underwriting condition you cannot meet, or a lender issue -- the financing contingency lets you exit the contract and recover your deposit.

Important nuance: if you are financing the purchase and you remove the financing contingency, you are essentially telling the seller that you will close regardless of whether your lender comes through. If your loan falls through at that point, you lose your deposit. This is a serious risk for buyers who are not cash buyers and should not be taken lightly.

That said, buyers who are exceptionally well-qualified and have already completed full underwriting (not just pre-approval, but full underwriting with a commitment letter) sometimes remove the financing contingency because their loan outcome is essentially certain. This requires working with a lender who can underwrite your file before you are under contract -- not all lenders offer this, but the best ones in this market do.

The Appraisal Contingency

If you are financing your purchase, your lender will order an appraisal to confirm that the home is worth at least what you are paying for it. The appraisal protects the lender, not you -- the lender will not loan more than the appraised value. If you offered $550,000 and the property appraises at $520,000, you face a $30,000 gap between what you offered and what your lender will finance.

Without an appraisal contingency, you have three options when an appraisal comes in low:

• Make up the difference out of pocket (pay the $30,000 gap in cash above your down payment)
• Renegotiate the purchase price with the seller (they may or may not agree)
• Walk away -- but without an appraisal contingency, you may lose your deposit when you do

With an appraisal contingency, a low appraisal gives you the right to renegotiate the price or cancel the contract and recover your deposit. This is particularly important in a market where prices have risen quickly and appraisers sometimes lag behind current conditions.

Some buyers in highly competitive situations offer to cover an appraisal gap up to a specified amount -- for example, "Buyer agrees to cover any appraisal gap up to $25,000." This is a more targeted way to strengthen an offer than removing the appraisal contingency entirely, because it limits your exposure while still showing the seller you are committed.

How Sellers Push Back on Contingencies in Northeast Florida

In a seller's market -- which St. Johns County has experienced in various forms since 2020 -- sellers and their listing agents sometimes present multiple-offer situations where buyers feel pressure to strip contingencies to compete. Here is how that typically plays out:

Sellers may counter offers requesting a shortened inspection period (5 days instead of 15), removal of the appraisal contingency, proof of full underwriting approval as a condition of removing the financing contingency, or a larger earnest money deposit as a show of commitment. These are negotiating positions, not ultimatums -- and your agent should be negotiating back, not just accepting them.

The key question to ask in any competitive situation is: what is your actual risk tolerance? An experienced buyer who has done a thorough pre-inspection, whose lender has completed full underwriting, and who has cash reserves to cover an appraisal gap can make strategic decisions to strip certain contingencies from a position of strength. A buyer who is stretching their budget, relying on a basic pre-approval letter, and has no reserve cash is in a very different position.

When Waiving a Contingency Is a Bad Idea

There is no universal rule -- context matters. But here are the situations where I strongly advise buyers not to waive contingencies:

• Older homes (15+ years) -- waiving the inspection period on an older home means accepting unknown repair costs blindly. Roof, HVAC, plumbing, and electrical issues can easily run $10,000 to $50,000 or more.
• Maximum budget buyers -- if you are already buying at the top of what your lender will approve, a low appraisal or a surprise repair need could put you in a genuinely impossible position.
• Pre-approval only (not full underwriting) -- removing the financing contingency when you only have a pre-approval letter is a meaningful risk. Pre-approvals are not loan commitments; they are preliminary assessments that can change when underwriting reviews the full file.
• First-time buyers unfamiliar with the process -- competitive pressure can feel urgent when you are new to real estate transactions. Having a calm, experienced agent who is not rushing you toward a decision is one of the most valuable things you can have in a competitive market.

One Contingency That Often Gets Overlooked: The Title Review

Beyond the big three, buyers in Florida should be aware of the title review process. While not always structured as a named contingency in the same way, your contract will specify a period during which a title company examines the chain of title for the property. They are looking for liens, judgments, easements, or other encumbrances that could affect your ownership.

If a title issue surfaces that cannot be resolved, you have the right to cancel the contract. Most transactions in Northeast Florida use a title company or real estate attorney to conduct this review, and it is a standard part of closing -- but understanding that it happens, and that it is a protection for you, is worth knowing before you get to the closing table.

Frequently Asked Questions

What is the difference between a pre-approval and a loan commitment?

A pre-approval is a lender's preliminary assessment of your borrowing capacity based on a review of your credit, income, and assets -- typically before a specific property is identified. A loan commitment (or full approval) is issued after underwriting reviews the complete file, including the specific property's appraisal and title. A loan commitment is a much stronger statement of your ability to close. Buyers who have a commitment letter before making an offer are in a significantly stronger negotiating position when it comes to contingencies.

Can a seller keep my deposit if I cancel during the inspection period?

Under the Florida AS-IS contract, no -- if you cancel within the inspection period for any reason, you are entitled to your full deposit back. The inspection period is specifically designed to give you that no-penalty exit window. Once the inspection period expires, however, your ability to exit without losing your deposit depends on the remaining contingencies still in place.

How much is a typical earnest money deposit in Northeast Florida?

In St. Johns County and the broader Northeast Florida market, earnest money deposits typically range from 1% to 3% of the purchase price, though sellers in competitive situations sometimes request more. The deposit goes toward your closing costs or down payment at closing -- it is not an additional expense. It is only at risk if you breach the contract outside of a valid contingency.

What happens to my contingencies if I am buying new construction?

New construction contracts are typically the builder's own contracts -- not the Florida AS-IS form -- and they tend to be written far more favorably for the builder. Inspection contingencies are often structured differently, financing contingencies may be tied to using the builder's preferred lender, and the rules around appraisal gaps vary. It is especially important to have an experienced buyer's agent reviewing a new construction contract before you sign, because these are not standard forms and the terms can differ significantly.

Is it ever smart to waive the appraisal contingency in St. Johns County?

For buyers who have the cash reserves to cover a potential appraisal gap and who are confident in the home's value, it can be a reasonable strategic decision in a competitive situation. A smarter approach than a full waiver is to offer an appraisal gap guarantee up to a specified dollar amount -- this shows the seller commitment while capping your actual exposure. Talk with your agent about what makes sense given the specific property, your budget, and the competitive environment at the time you are making the offer.

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What To Do Right Now

Before you write an offer on a home in Northeast Florida, make sure you understand what you are signing -- especially in a competitive situation where someone may be encouraging you to move fast and waive protections. The 10 minutes it takes to understand your contingencies can be the difference between a smooth closing and an expensive lesson.

Call or text Joey Larsen at 904-863-6679, or visit RetireMeToFlorida.com to get started.