A contingency clause is a real estate contract element that must be met for the contract to become binding. Contingencies provide both parties the right to cancel a contract if the contingency isn’t met. That can also result in earnest money deposits being returned. There is a wide range of contingencies typical in real estate contracts.
Home inspection contingency. This contingency provides time for a thorough home inspection covering everything from HVAC to pests to plumbing and more.
Mortgage contingency. This is also called a financing contingency. It specifies the amount of time the buyer has to obtain financing.
Appraisal contingency. The lender will only finance a certain percentage of a home, and the appraisal will verify the appropriate amount.
Title contingency. The title company or a real estate attorney will research the property title to ensure there are no open liens or issues.
Home sale contingency. This provides the buyer time to sell their current home.
Home insurance contingency. Lenders and sellers may require that the buyer purchase homeowner’s insurance before the sale.
Right to assign contingency. This clause is used by wholesale real estate investors who buy a property contingent on assigning the contract to another buyer.
Kick-out clause. This clause allows the seller to continue to market the property under a contingency contract.