Real Estate Terms Glossary
What is a Contingency?
A contingency, in real estate, is a clause or provision in a property purchase and sale agreement that specifies a requirement or action that you have to meet to make sure that the real estate contract can become legally binding.
You can think of a contingency provision as an escape clause that you can use under defined circumstances. You will find contingencies, such as financing contingencies, in most real estate contracts. Contingencies help protect the buyer as well as the seller.
For example, if the homebuyer is unable to secure the mortgage, they can withdraw from the contract without incurring a financial penalty. This is, for example, a contingency that helps protect the buyer.
Examples of Contingencies
- Example 1: Mortgage contingency
- Example 2: Title contingency
- Example 3: Appraisal contingency
Here’s Investopedia’s definition of a contingency .
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