In real estate, a "contingency" refers to a condition of the Agreement of Sale that needs to occur in order for the transaction to keep moving forward. As the buyer, there are many contingencies that you can choose to include in your contract.
4 main contingencies in a real estate contract
- Financing – loan approval
In a hot sellers market some buyers will choose to make an offer with no contingencies. That can be risky. Let’s say you do the inspections and something major is discovered and you decide not to buy the house, without the inspection contingency, you can still cancel the contract, but you will be subject to losing your earnest money.
Same with loan approval….if you were to lose your job and now can’t qualify for the mortgage, you would be forced to cancel the contract and again subject to losing your earnest money because you didn’t have a loan contingency in place.
If you are not someone who likes to take risks, protect yourself by including contingency clauses in your real estate contract.