Real Estate Glossary

What Is a Contingency Contract in Real Estate?

Contingencies are specific clauses in contracts that specify a requirement that must be met by one or all parties to be considered a successful agreement and become legally binding. In order to create contingencies, both parties must agree to all terms before signing the contract.

Common contingencies seen in real-state are mortgage, title, home inspection, etc.

If this or any other contingency isn't met, both parties have the legal right to end the contract and create new agreements with other buyers or sellers. Nonetheless, they could choose to negotiate and create new contingencies to pursue the property's transaction.

They are usually tied to "earnest money," which is the initial deposit that the buyer makes when signing a contract. If the contingency isn't met, the buyer must be immediately refunded.

Even though contingencies can be advantageous for staying secure when doing a real estate transaction, it is not recommended to clutter the contract with too many of them. Doing this could lower the prestige of the property and make its demand sink.

If you want to know which contingencies are best for protecting you, whether you're a buyer or seller, the best thing you can do is to contact a real estate lawyer who can walk you through the whole procedure.