What is a contingency and how does it work?

Most purchase and sale agreements include contingencies. Two of the most common are a financing contingency, which makes the sale dependent on the buyers’ ability to obtain a loan commitment from a lender, and an inspection contingency, which allows buyers to have professionals inspect the property to their satisfaction. These contingencies allow the buyer to break the contract should the contingency not meet with their approval. However, the buyer could forfeit their deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract. Conversely, the agreement must include the seller’s responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any mutually agreed-upon repairs to the property. These contingencies along with others such as Title, Feasibility, Short Sale and Septic contingencies are not to be confused with what is termed a “contingent offer,” which means that an offer is made “contingent upon” the successful sale of another property currently owned by the buyer.