In real estate contracts, what does the term “contingency” refer to?

The term "contingency" in real estate contracts refers to a condition that must be met before the contract becomes binding. This means that the contract is contingent upon certain events or conditions occurring; if those contingencies are not satisfied, the parties may not be obligated to proceed with the contract.

Common examples of contingencies include obtaining financing, the results of a home inspection, or the sale of another property. These conditions provide a level of protection for the parties involved by allowing them to back out of the agreement without penalty if the specified conditions are not met. Understanding contingencies is crucial for both buyers and sellers in navigating the complexities of real estate transactions.