What is a contingency in a real estate contract?

As a lawyer, I can provide legal advice on the topic of what a contingency means in a real estate contract.

A contingency in a real estate contract is a clause that gives the buyer the right to back out of the contract under specific circumstances. Contingencies are included in real estate contracts to protect buyers from losing their earnest money deposit or being forced to buy a property that they do not want.

Examples of common contingencies in real estate contracts include:

1. Financing Contingency - This contingency allows the buyer to back out of the contract if they are unable to secure financing to purchase the property.
2. Inspection Contingency - This contingency allows the buyer to back out of the contract if they discover significant issues during the inspection process that the seller is unwilling to fix.
3. Appraisal Contingency - This contingency allows the buyer to back out of the contract if the appraisal comes in lower than the purchase price.

If a contingency is triggered, the buyer can typically back out of the contract without penalty or loss of their earnest money deposit. However, it is important to note that contingencies often have strict deadlines, and if the buyer does not properly exercise their rights under the contingency, they may lose the protection that it provides.

To ensure that contingencies are properly included and negotiated in a real estate contract, it is recommended that buyers work with a licensed real estate agent or attorney. These professionals can help buyers understand their rights, negotiate the terms of the contract, and ensure that deadlines are met.