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What Are Contingencies In Real Estate?
The Oxford Learner’s Dictionary defines a contingency as "an event that may or may not happen," but in the context of real estate, it is a condition or action that a deal must include for the sales contract to become binding. A contingency becomes part of a contract after the buyer and seller agree to the contract terms and sign the sales contract
The three most common contingencies — which allow both parties to cancel a contract in the instance of specific conditions negotiated by the buyer and seller — are appraisal, financing, and inspector contingencies. An appraisal contingency allows the buyer to cancel the deal if the property is not assessed at the agreed minimum value, as guaranteed.
A financing/mortgage contingency provides buyers with a specified amount of time to obtain their financing for securing the purchase of the property. Finally, an inspector/due diligence contingency gives buyers the right to have their home inspected before a sale is finalized and cancel the sale or negotiate repairs based on the inspection.