What is a contingency?

What is a contingency in a Real Estate Transaction?

Specifically what is a  contingency when we are talking about buying or selling a house.

A contingency is a condition in a purchase and sale contract that must be fulfilled by a buyer in order to proceed with the purchase/closing of a house.  A contingency allows a buyer to get out of a contract and obtain a refund of their earnest money deposit if a certain condition is not fulfilled.

Contingencies are added into a purchase and sale contract to protect a buyer.  They are important to a seller because they are a way for a buyer to get out of a purchase and sale contract and no longer purchase the home. Until the contingencies are satisfied the sale for the seller is not secure.

There are several contingencies that can be added to a purchase and sale agreement.

The common ones are A financing contingency, an inspection contingency, a title contingency, an appraisal contingency, a septic or well contingency and a sale of a property contingency.


If you are a Buyer - Contingencies are not mandatory.  They are in there for you as a buyer to discover facts about the property prior to closing and to protect your earnest money.  If a contingency is not included in the contract,  the buyer still has the right to terminate the agreement but would be at jeopardy of losing their earnest money or sellers election of remedies (whatever is marked on the purchase and sale). For a buyer the more contingencies the more protection from unknowns but In some situations there are advantages to buyers to not use contingencies -you will definitely want to discuss the pros and cons with your agent.

If you are a seller – the less contingencies in the offer to purchase your home the better.  Contingencies create outs for buyers and doubt in the sale.

Please watch for my upcoming videos for a more in depth explanation for each type of contingency.

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I will see you next time!