What does the term "contingency" mean in real estate transactions?

In real estate transactions, the term "contingency" refers to a condition or requirement that must be satisfied for the contract to become binding and for the transaction to proceed to closing. This means that if the specific contingency is not met, the buyer or seller has the right to back out of the agreement without penalty.

Contingencies can outline various conditions, such as the buyer securing financing, conducting satisfactory inspections, or waiting for the sale of an existing property. The existence of a contingency ensures that all parties have a clear understanding of the conditions under which the sale can continue. It protects buyers and sellers by allowing them to make decisions based on certain expectations being met before fully committing to the sale.

In this context, other choices, while related to aspects of real estate transactions, do not capture the full definition of a contingency. For example, while securing financing can indeed be a type of contingency within a purchase agreement, it does not represent the broader definition of a contingency itself. The same applies to clauses about delays or mandated repairs; these may be elements of a contract but do not encompass what a contingency fundamentally signifies in the realm of real estate.