Real Estate Contingency

Definition of "Real Estate Contingency"

Chris  Silva real estate agent

Written by

Chris Silvaelite badge icon

Homesmart

Need to understand what is a real estate contingency?

In general, a contingency is a condition for something to happen, so the real estate contingency definition relates to provisions included in the sales contract stating that certain events must occur, certain actions must be taken and/or certain conditions must be met in order to make the contract valid. If not; the sales contract will automatically be voided.

So, in a lot of ways, a real estate contingency is also a negotiation tactic. A way to force the other party to take an action, otherwise you will back off the deal.

Here are some examples of a real estate contingency:

  • A home inherited by a son while his father is alive and living in it, will only have its title transferred to him, once the father dies. The transfer of title – already signed and everything – is contingent to the father’s death.
  • The need for the mortgage itself is a real estate contingency and most contracts have in writing something like “This contract is contingent upon the securing of a mortgage loan at an interest o X% or less by the home buyer”. With a deadline set, should the home buyer not secure that financing and not request in writing a deadline extension – plot twist! -  the contingency clause itself can become null and the home buyer becomes obligated to purchase the property; even if the loan is not secured.
  • The whole deal is usually contingent to a positive report by the home inspector in relation to certain minimum safety requirements.

Another real estate contingency is done on appraisal contracts. To protect the property, the homeowner makes a contingency clause in the appraisal contract establishing a minimum value for the house. If the appraiser values the house under, he agrees not to record the findings and make the appraisal null. He does receive the money for his services, though. But that only happens when the owner does the appraisal with no buyer yet; before he puts the house on the market. When there’s a home buyer, then the real estate contingency is usually to protect the home buyer, not the home seller: if the value is under the minimum, the home buyer can back away from the deal and, in many cases, retrieve the earnest money.

 

Need help as a:

I'm interested to:

Buy
Sell
Rent

I work in:

Residential
Commercial
Rental
Reach out to the local professionals for help
 
I agree to receive FREE real estate advice.

Agents, get listed in your area. Sign up Now!

Here's what you'll get:

1. Full zipcodes coverage for the city of your choice for 3 months

2. The ability to reach a wider audience

3. No annual contract and no hidden fees

4. Live customer support/No robo calls

$75 - Any City - 3 Months Coverage
 
loader gif

Please wait ...

I agree to receive FREE real estate advice
I agree with Terms & Conditions and Section 5-5.9.

Real Estate Tips:

A real estate agent should be your contingency when selling or buying a house. They are used to all sorts of real estate contingencies; they’ve seen them all. Have one by your side helping you dodge the problematic ones and taking advantage of the helpful ones!

 

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Also known as “cap rate” or “income yield”, Capitalization Rate is a useful way to compute the rate of return on a real estate investment. It is commonly used in the ...

Also called negative leverage. The interest rate on the obligation exceeds the return rate on the real estate investment. As a result losses are magnified. ...

Spread between girders or heavy walls. ...

Writ issued by a superior court to a lower court requiring the latter to produce a record of the proceedings of a particular case. The purpose of a writ of certiorari is to review the ...

Landowner's legal right to the water found on his property. For example, there might be a stream of water adjacent to the land. The water might be used for irrigation or other purposes. ...

Same as term graduated lease: A rental stipulation a varying rental rate. Rental rate are determined tied to periodic appraisals or an inflation or an inflation index. The provision is more ...

Geographic location where a court action and trial takes place. The legal proceedings should occur in the place where jurisdiction applies. A "change of venue" may occur in a criminal ...

The portion of a structure providing the primary ground support. Foundations have a foundation wall forming a permanent below grade retaining wall. All modern foundations rely on concrete ...

Owner of real property who gives another the right to use it in return for rental payments. The three types of leases for the lessor are the direct financing lease, the sales-type lease, ...

Popular Real Estate Questions