In Santa Fe real estate transactions, contingencies play a critical role in protecting buyers while setting clear expectations for sellers. A contingency is a condition that must be satisfied within a specific timeframe for the contract to remain in force. Understanding how these work locally is especially important because Santa Fe properties often involve wells, septic systems, historic construction, acreage, and association governance that are less common in other markets.
Below are the most common contingencies buyers and sellers encounter in Santa Fe transactions, and how they typically function.
Inspection Contingency
This is one of the most important contingencies for buyers. During the inspection period, buyers may conduct a wide range of inspections beyond a standard home inspection. These often include roof inspections, sewer line inspections, well testing, radon testing, structural evaluations, and heating system reviews.
Buyers have the right to object to conditions discovered during inspections, request repairs or concessions, or terminate the contract within the inspection deadline if concerns cannot be resolved.
Septic System Contingency
For properties served by a septic system, a septic evaluation contingency is standard in Santa Fe transactions.
A licensed professional evaluates the system to confirm it is functioning properly and meets current requirements. Importantly, the septic inspection itself and any required corrective work are typically paid for by the seller, unless the parties negotiate otherwise. This makes septic evaluation the one inspection cost most often borne by the seller rather than the buyer.
If the septic system fails inspection or requires repair or replacement, the seller is usually responsible for completing the work prior to closing or renegotiating terms. Buyers retain the right to terminate if the issue cannot be resolved within the contingency period.
Appraisal Contingency
When a buyer is obtaining financing, the property must appraise at or above the purchase price. If the appraisal comes in low, the buyer typically has options that include renegotiating the price, bringing additional cash to closing, or terminating the contract within the allowed timeframe.
Even some cash buyers choose to include an appraisal contingency, particularly in a shifting or uncertain market.
Loan and Financing Contingency
This contingency protects the buyer if they are unable to obtain financing on the agreed terms. It is tied to strict deadlines for loan application, lender approval, and delivery of any required rejection notice if financing is denied.
Failure to meet these deadlines can result in loss of earnest money, which makes careful tracking essential.
Insurance Contingency
In New Mexico, buyers have the right to obtain acceptable homeowners insurance within a specified period. This contingency has become increasingly important due to wildfire risk, property location, roof type, and construction materials.
If a buyer cannot obtain insurance at normal and customary rates, they may be able to terminate the contract within the insurance contingency window.
Survey or Improvement Location Report Contingency
Buyers often have the right to review a survey or Improvement Location Report. These documents show property boundaries, improvements, encroachments, easements, and access issues.
If concerns arise, such as boundary discrepancies or unexpected encroachments, buyers may object and seek resolution before proceeding.
HOA or COA Document Review Contingency
For properties governed by a Homeowners Association (HOA) or Condominium Owners Association (COA), buyers have the right to review governing documents during a specified contingency period.
These documents typically include:
- Covenants, Conditions, and Restrictions (CCRs)
- Bylaws and rules
- Budgets and financial statements
- Reserve studies
- Insurance summaries
- Pending special assessments or litigation disclosures
This contingency allows buyers to evaluate restrictions, fees, financial health, and governance before moving forward. If the documents are unacceptable, the buyer may terminate the contract within the review period.
Title Review Contingency
Once a title commitment is issued, buyers have the opportunity to review recorded easements, covenants, restrictions, and any liens or assessments affecting the property. If unacceptable title issues cannot be resolved, the buyer may terminate the contract within the title objection period.
Sale of Buyer’s Property Contingency
Some buyers make their purchase contingent on the successful sale or closing of another property. While less attractive to sellers in competitive situations, this contingency still appears regularly, particularly for local move-up buyers.
Why Contingencies Matter in Santa Fe
Santa Fe’s housing stock is diverse and often complex. Older homes, rural properties, septic systems, private roads, and association governance all increase the importance of carefully structured contingencies and well-managed timelines.
Understanding how these protections work, and how they are applied locally, helps buyers make informed decisions and helps sellers evaluate the strength of an offer beyond just the price.
✨ About Adrienne DeGuere, Sotheby’s International Realty, Santa Fe
I am a licensed Realtor specializing in Santa Fe’s luxury and relocation markets, with 130 successful transactions and deep experience guiding buyers and sellers through contract contingencies, inspections, negotiations, and closing timelines unique to Northern New Mexico.
If you are buying or selling in Santa Fe and want clarity around contingencies, septic obligations, or association document review, contact me. I am happy to help you structure or evaluate an offer with confidence and local expertise.
