How is "contingency" defined in a real estate contract?

A contingency in a real estate contract is defined as a condition that must be met for the contract to be legally binding. This means that certain specified events or actions need to occur within a defined time period for the agreement to remain valid. Common examples of contingencies include securing financing, passing a home inspection, or the buyer selling their existing home before completing the purchase. If these conditions are not satisfied, the contract may be terminated without penalty, protecting both the buyer and seller from potential issues that could arise later in the transaction.

This understanding is critical for both buyers and sellers as it lays the groundwork for the expectations and responsibilities of each party in the transaction. It also highlights the importance of clear communication and thorough due diligence in real estate dealings to ensure all contingencies are properly addressed.