What are Contingency Clauses in Home Purchase Contracts?

A contingency clause is a provision added to a purchase agreement that specifies an event that must take place before the closing of a real estate deal. The buyers may cancel the sale if this circumstance doesn’t occur. In other words, certain requirements must be met for sale to go through. An appraisal contingency, inspection contingency, sale contingency, or funding contingency are typically real estate contingencies.

Key Points

  • The contingency clause provides the authority to renegotiate or terminate a contract if certain conditions turn out to be unsatisfactory.
  • A professional property appraisal contingency allows the buyer option to out if the value is less than a predetermined minimum.
  • A due diligence or inspection contingency allows the buyer to have the house inspected by a specific date.
  • With a financing contingency, sometimes known as a “mortgage contingency,” the buyer has time to get a mortgage and the option to back out if it is not approved.

Examples of Contingencies in Real Estate?

1) Real estate sales typically include a finance contingency. If the buyer intends to purchase the property using a loan or mortgage, they will probably wish to incorporate this contingency. If their financing falls through, they are able to end the agreement without incurring any fees.

2) An appraisal contingency is also common. The buyer has the option to dissolve the contract if they so want if the property isn’t appraised by a third party for the agreed price or more.

3) The inspection contingency comes last. It enables a specialist the buyer has hired to inspect the property and provide a report on its state. The sale may be called off if problems arise and the buyer and seller are unable to resolve them amicably.

How Long Is a House’s Contingency Period?

Depending on the sort of contingency, a contingency period’s length varies. A contingency period for a mortgage or credit usually lasts between 30 and 60 days. A 10-day contingency time for inspections is possible.

Difference Between Contingent and Pending

“Pending” and “Contingent” are common terms on real estate listings that indicate the current phase of the property transaction. The property is under contract, and the seller has accepted an offer, but there are some conditions or contingencies that must be satisfied before the transaction is final. Pending means either:

  • The purchaser made a condition-free offer.
  • The buyer deleted their conditions precedent.

Therefore, pending is a status that represents a step closer to the actual sale or closure than contingent is in the transaction process.

What happens if a contingency isn’t met?

If a contingency condition isn’t fulfilled, then a party may deem the contract null and can back out without any legal outcomes. And if the conditions are fulfilled, a party would be in breach of contract if they decide to go back.

The results of being in breach of contract may vary. The seller may sue for a particular performance to compel the buyer to buy the house if a buyer cancels and the seller is unable to locate another buyer.


A real estate contract is a binding agreement that specifies each party’s responsibilities and functions in real estate transactions. It’s crucial to read and comprehend your contract, paying close attention to all timeframes and deadlines that are mentioned. Time is of the essence; thus, even one day (or one missed deadline) can have a detrimental, expensive impact on your real estate.

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