What is a "contingency" in a real estate contract?

A "contingency" in a real estate contract refers to a condition that must be satisfied for the agreement to be enforceable. This means that certain events or circumstances must occur, or specific requirements must be fulfilled, for the contract to take effect or continue. Common examples of contingencies include financing contingencies, where the buyer must secure a mortgage, or home inspection contingencies, where the sale depends on a satisfactory inspection of the property.

This contractual mechanism ensures that the interests of both parties are protected. If the contingency is not met, the parties can typically walk away from the agreement without penalty, allowing for flexibility in the transaction process.

Other options, while related to real estate, do not accurately define the term "contingency." For instance, the necessity of a condition for property renovation focuses on construction aspects rather than contract fulfillment, a warranty for property defects refers to assurances about the condition of the property rather than contractual clauses, and terms regarding property taxes deal with financial obligations but do not touch on the binding nature of the contract itself.