What is a contingency clause in a real estate contract?

A contingency clause in a real estate contract refers to a condition that must be satisfied before the contract becomes legally binding. This means that certain events or conditions must occur for the agreement to progress. For example, common contingencies include a buyer securing financing, satisfactory completion of a home inspection, or the successful sale of the buyer’s existing property. If these contingencies are not fulfilled, the buyer or seller may have the right to cancel the contract without penalty, thereby protecting their interests in the transaction.

While the other options describe various aspects or components that could be part of a real estate transaction, they do not capture the essence of a contingency clause. For instance, requiring a property inspection before closing could be a specific type of contingency, but it is just one example rather than defining what a contingency clause is. Similarly, price negotiations and seller financing are separate elements of negotiations and contract terms, and they do not directly define what makes a clause a contingency within the context of a real estate contract.