Definition
Conditions in your purchase agreement allowing you to terminate the contract if specific requirements aren't met, such as inspection, appraisal, or financing issues. Contingencies protect you from purchasing properties with problems.
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Common contingencies include inspection (allowing buyers to terminate if major defects are found), appraisal (allowing termination if appraisal is below purchase price), and financing (allowing termination if the buyer cannot obtain financing). Removing contingencies makes offers more attractive to sellers but increases buyer risk.
Pro Tip
Keep contingencies in place during due diligence. Removing them too early limits your options if problems emerge.
Example
The purchase agreement included contingencies for inspection, appraisal, and financing, giving the buyer three opportunities to back out if issues arose.