A contingency is a condition or requirement that must be met for the contract to proceed and become binding. Contingencies are safeguards for buyers and sellers to protect their interests and provide a way to cancel or renegotiate the contract if certain conditions are not met. Several contingency examples in a contract include home inspection, seller disclosure, financing, appraisal, and title: Home Inspection - this contingency gives the buyer the opportunity to conduct a professional home inspection. If the inspection uncovers significant issues or defects, the buyer may request repairs, credits, or negotiate a lower purchase price. If the parties are unable to reach an agreement, the buyer can choose to cancel escrow. Seller Disclosure - this contingency is a provision that allows the buyer to receive and review certain disclosures and reports from the seller regarding the condition of the property. This contingency is typically included to protect the buyer and provide them with important information about the property before proceeding with the purchase.
Financing - this contingency allows the buyer a specified amount of time to secure a mortgage loan. If the buyer is unable to obtain financing within the agreed-upon timeframe, they can back out of the contract without penalty. Appraisal - this contingency allows the buyer to ensure that the property's appraised value meets or exceeds the agreed-upon purchase price. If the property appraises for less than the purchase price, the buyer can negotiate with the seller for a price reduction or choose to cancel the contract. Title - this contingency ensures that the property has a clear and marketable title. If title issues are discovered, such as liens or disputes, the buyer may request the seller to resolve these issues. If unsuccessful, the buyer can choose to cancel.