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

A "contingency" in a real estate contract refers to a condition that must be met for the contract to become enforceable. This means that the contract is not fully binding until certain specified conditions are satisfied. For example, a common contingency might require that the buyer secure financing or that the property pass an inspection. If these conditions are not met, the buyer has the option to back out of the deal without penalty. This mechanism safeguards both parties by allowing them to ensure that critical aspects of the transaction are satisfactory before finalizing the agreement.

In contrast, other alternatives do not accurately define a contingency. A clause that makes the contract void immediately would imply that the contract is null from the start, which is distinct from the idea of contingencies that allow for conditional fulfillment. An additional fee imposed on the buyer does not relate to the concept of a contingency, as it refers to costs rather than conditions. Lastly, a statement of property disclosures relates to the seller's obligation to inform buyers of certain facts and defects about the property, which is separate from the conditional nature of contingencies.