What is a contingency clause in a real estate contract?

A contingency clause in a real estate contract refers to specific conditions or requirements that must be met for the contract to be executed or for the buyer or seller to be obligated to proceed with the transaction. This clause serves as a safeguard for the parties involved, allowing them to negotiate certain terms and ensuring that they can withdraw if specific circumstances are not fulfilled.

For example, common contingencies might include securing financing, satisfying a home inspection requirement, or obtaining a satisfactory appraisal. If these conditions are not met, the buyer or seller can usually terminate the contract without incurring penalties. This highlights the critical nature of contingency clauses in providing flexibility and protection in real estate transactions.