Real Estate Glossary > C > Contingency Definition

Conditions included with an offer on a home that must be fulfilled before the deal can close. If a buyer or seller is unable to satisfy a contingency, then the offer on a home may become void. Contingencies usually include time frames in which a buyer can get his earnest money The money buyers pay one to three business days after agreeing with the seller on a price for the home to show that they're serious about the offer. back if the contingency isn't fulfilled before the deadline. For example, if a buyer schedules an inspection A thorough investigation of a home by a licensed inspector to discover any issues or repairs that need to be made before buying the home. within the time specified on his contract and decides that he needs to make too many repairs, he can rescind A form buyers sign if they back out of an offer on a home. The buyer's agent will submit this form to the listing agent so the sellers know the deal is off. his offer and get his earnest money back. Here are the most common contingencies:

• Financing Contingency: the buyer must get approved for a mortgage loan Funds borrowed from a mortgage lender or broker to finance the purchase of a home. to be able to buy the home. He will have a set amount of time to receive a loan commitment letter A lender's promise to provide a borrower with a loan at an agreed upon interest rate over a certain period of time. from a lender to confirm the approval of his loan application.
• Inspection Contingency: gives the buyers the right to get the home inspected and negotiate further if there are repair issues. The inspection usually happens 5 – 7 business days after mutual acceptance. With REOs Short for "real estate owned," REOs are foreclosed homes owned by banks and lenders. , the banks rarely agree to pay for any repairs; buyers should still get an inspection, but they'll need to cover any repair costs.
• Sale contingency: the success of the offer on a home depends on the sale of the buyer's current home.
• Title Contingency: the offer depends on whether the title A legal document listing the history of ownership of the home. A title report lists all parties with a legal claim to the property, what items need to be cleared from title before the new buyer can take possession, and if there are any easements or encroachments on the property. of the home that documents the history of ownership is clear of any liens Any legal claim of ownership listed on the title of the home. . This contingency grants the buyer the right to review a title report.