Contingency
Also known as: Condition Precedent, Contract Contingency
A condition that must be met before the purchase agreement becomes binding or before closing can occur. Common contingencies include financing approval, home inspection, and appraisal.
Detailed Explanation
A contingency is an escape hatch built into the contract. If the condition is not met by a specified deadline, the buyer can typically cancel the contract and get their earnest money back.
In resale transactions, common contingencies include financing (your loan must be approved), inspection (the home must pass inspection to your satisfaction), and appraisal (the home must appraise at or above the purchase price).
Builder contracts often have fewer contingencies than resale contracts. Many production builders limit or eliminate inspection contingencies and appraisal contingencies, and may offer only a narrow financing contingency.
In Your Contract
Look for sections labeled "Contingencies," "Conditions," or "Buyer's Conditions Precedent." Also check whether the contract says it is "non-contingent" or "as-is" — this may mean no contingencies exist.
Key Points
- 1Contingencies protect you by allowing cancellation if conditions are not met.
- 2Builder contracts often have fewer contingencies than resale contracts.
- 3Each contingency has a deadline — missing it may waive the protection.
- 4Common contingencies include financing, inspection, and appraisal.
- 5If your contract has no contingencies, understand that you may have very limited ability to cancel without losing your deposit.
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