Contracts
What Is a Contingency in Real Estate?
A contingency is a condition that must be met for a real estate purchase contract to become binding or for a party to be obligated to complete the transaction. Contingencies protect buyers (and sometimes sellers) from being locked into a transaction if certain conditions aren't satisfied.
Common Contract Contingencies
Inspection Contingency
Allows buyer to have the property professionally inspected. If unsatisfactory issues are found, buyer can request repairs, negotiate a credit, or exit the contract. Typically 7–14 day window.
Financing Contingency
Protects buyer if they are unable to obtain a mortgage commitment at specified terms. Buyer can exit and recover earnest money if financing falls through. Typically 21–30 days.
Appraisal Contingency
If property appraises below the purchase price, buyer can renegotiate the price, cover the gap, or exit the contract. Protects buyers from overpaying for properties that don't appraise.
Home Sale Contingency
Buyer's purchase is contingent on their current home selling. Seller usually retains the right to continue marketing and accept other offers (kick-out clause). Creates uncertainty for sellers.
Contingency FAQ
What happens if a contingency is not met?
If a contingency is not satisfied within the specified time period and the buyer exercises their right to exit, the contract is terminated and the earnest money is returned to the buyer. If the buyer fails to exercise the contingency in time and the deadline passes, the contingency may be waived automatically, leaving the buyer at risk of losing earnest money if they back out.
Should buyers waive contingencies in a seller's market?
Waiving contingencies — especially inspection — is risky. Buyers should understand what they're giving up. Waiving inspection means accepting the property as-is, even with unknown defects. Waiving financing means committing to purchase even if the loan falls through, risking earnest money. Some buyers waive appraisal contingency but preserve financing contingency — a middle-ground strategy.
What is a kick-out clause?
A kick-out clause (or release clause) is used with a home sale contingency. It allows the seller to continue marketing the home and accept backup offers. If a better offer comes in, the seller can 'kick out' the contingent buyer, who then has a specified period (often 48–72 hours) to either remove their home sale contingency or exit the deal.
What is a contingency period vs. a due diligence period?
A contingency period is tied to a specific condition (inspection, financing, appraisal) — if the condition isn't met, the buyer can exit. A due diligence period (used in some states, particularly NC) is a broad period during which the buyer can exit for any reason or no reason — it's more comprehensive than individual contingencies.
Related Resources
Definition Page Pillars
Use this term page as a concept layer, then return to pillar pages for full workflow review.