A real estate contingency contract requires specific conditions to be fulfilled before the sale becomes legally binding. While these clauses offer buyers and sellers protection, they can also introduce challenges:

• Buyers: Gain leverage with a “get-out” clause if things don’t go as planned.

• Sellers: Often prefer fewer contingencies to streamline the sale process.

Key Points:

• Contingencies are conditional clauses in real estate contracts.

• They can lengthen the buying process but add essential protections.

• Most contracts include some form of contingency, such as financing or inspection clauses.

Common Contingencies in Real Estate

Here’s a breakdown of the most typical contingencies found in real estate contracts:

1. Home Inspection Contingency

Allows buyers to have the property professionally inspected. If major issues are uncovered, the buyer can:

• Request repairs

• Renegotiate the price

• Walk away from the deal

2. Financing Contingency

Protects buyers if they fail to secure a mortgage. Key elements include:

• Loan approval deadlines

• Refund of earnest money if financing falls through

3. Appraisal Contingency

Ensures the property’s appraised value meets or exceeds the purchase price. If it doesn’t:

• The buyer can renegotiate or back out without penalty.

4. Home Sale Contingency

Allows buyers to finalize the purchase only if they sell their current home. Sellers often counter with a kick-out clause to keep options open.

5. Title Contingency

Guarantees the property has a clear title, free from liens or disputes. Resolving title issues is crucial for a smooth transaction.