What are Contingencies?

A contingency is a clause or condition included in a contract that must be met in order for the contract to be binding and enforceable. In real estate, contingencies are commonly used to protect the interests of both buyers and sellers during the purchase process. Contingencies provide an opportunity for the buyer to cancel the sale or renegotiate the terms of the contract if certain conditions are not met.

Here are some common examples of contingencies in a real estate contract:

1. Financing contingency: This contingency allows the buyer to cancel the sale if they are unable to secure financing for the purchase. The buyer must provide proof of their loan application and a commitment letter from the lender before the contingency expires.
2. Home inspection contingency: This contingency allows the buyer to cancel the sale or request repairs or concessions if the inspection reveals issues with the property. The contingency may specify a timeframe for the inspection and any requests for repairs or concessions.
3. Appraisal contingency: This contingency allows the buyer to cancel the sale or renegotiate the purchase price if the appraisal value of the property is lower than the sale price. The buyer must provide proof of the appraisal value before the contingency expires.
4. Sale contingency: This contingency allows the buyer to cancel the sale if they are unable to sell their current home within a specified timeframe. The buyer must provide proof of their efforts to sell their current home and a contingency release from the buyer of their current home before the contingency expires.
5. Title contingency: This contingency allows the buyer to cancel the sale if there are any issues with the property’s title, such as liens or encumbrances. The seller must provide proof of clear title before the contingency expires.

These are just a few examples of the contingencies that may be included in a real estate contract. The specific contingencies included in a contract will depend on the needs and concerns of the buyer and seller. Contingencies help to ensure that both parties are protected during the purchase process and that the sale proceeds smoothly.