Whether you’re a property buyer or seller, working with a real estate agent is crucial to ensure a smooth transaction. In between the submission of an offer and the closing, many factors can cause the deal to fall through. One way to protect both parties is the inclusion of contingency clauses. Here’s what you need to know about them.

What Are Contingencies?

In real estate, contingencies or contingency clauses are stipulations in the purchase agreement indicating specific conditions that must be met for the contract to be legally binding. They safeguard the buyer and the seller; under unsatisfactory or lacking circumstances, either party will have the right to cancel without obligations or renegotiate the deal.

The details of contingency clauses should be outlined, written clearly, and easily understandable by all parties; your real estate agent may explain these beforehand. Once the conditions are met and the purchase agreement signed, it becomes enforceable. When one party backs out, they breach the contract and will likely face the consequences, such as earnest money forfeiture, penalties, or a lawsuit.

What Are the Most Common Contingencies?

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Contingency clauses can be for any requirement, concern, term, or condition; consult your real estate agent about what to consider for your protection. While many can be included, there are several common and critical ones that are often included. 

A financing or mortgage contingency indicates the timeframe that the buyer must secure financing for purchasing the property. If they cannot obtain a loan from the bank, mortgage broker, or any other lender by the deadline, they can withdraw from the deal and get back their earnest money. 

An inspection contingency specifies the number of days the buyer is given to have the property inspected by a professional. The home inspection ensures the residential structure has no serious issues or defects. Depending on the terms, the buyer can terminate the contract, include the cost of repairs as a concession, or have the seller remedy the problem. 

An appraisal contingency ensures the property is valued at the indicated sales price, protecting the buyer against overpricing. If the appraisal is below the asking amount, the buyer can back out or the seller may reduce their price to match the fair value.


Understand contingencies further with a trusted real estate brokerage like Eastern Real Estate Company. Headquartered in Phoenix, AZ, their licensed real estate agents can help you navigate transactions involving selling or buying any property. Learn more about this Realtor® online, or reach out at (602) 731-7597 to speak with one of their professionals.