Go to 
A contingency is a section in a real estate contract, set by either the homebuyer or seller, that outlines a condition that must be met before the contract can be fulfilled. Many contingencies are built into standard home purchase contracts to protect both parties from unknown factors. They typically allow one party to cancel the contract without penalty if a condition is not met. In the event there is a penalty, it often involves buyers forfeiting their earnest money deposit or sellers refunding it, though other losses may apply.
Common contingencies include:
- Financing or mortgage contingency: Allows a buyer to terminate the contract if the buyer is unable to obtain financing for the purchase.
- Home inspection contingency: Protects homebuyers from unknown issues and repairs by allowing them time to conduct an inspection. This contingency is often written so the buyer can exit the contract if the inspection is unsatisfactory.
- Home sale and settlement contingency: Grants buyers time to sell their current home before closing on the seller’s home. These contingencies typically allow sellers to continue accepting offers from other buyers, however. In the event buyers can’t sell their home or remove the contingency by an agreed deadline, the contingency generally allows sellers to move forward with the second offer.
- Appraisal contingency: Enables the buyer to cancel the contract if their lender’s appraisal (actual assessed value) comes back lower than the agreed selling price.
- Title contingency: Ensures that a buyer will be able to get out of the contract without penalty if a problem is discovered with the property’s title history such as an unsettled lien from a previous owner or unpaid taxes.
Further reading
See also earnest money deposit
