Mortgage Glossary
Contingency
A condition written into a purchase contract that must be met for the sale to move forward. If not met, the buyer can exit the deal.
What It Means
Contingencies are protective clauses in a real estate contract that give buyers (and sometimes sellers) a way out if specific conditions aren't met.
Common contingencies:
- Inspection contingency: Allows buyer to exit if inspection reveals unacceptable issues
- Financing contingency: Protects buyer if their loan falls through
- Appraisal contingency: Lets buyer exit if appraisal comes in below purchase price
- Sale contingency: Makes purchase dependent on selling the buyer's current home
In competitive markets, some buyers waive contingencies to make their offer more attractive — but this comes with real risk. Talk to your agent and lender before waiving any contingency.
Real-World Example
"Your offer includes a financing contingency. When the lender denies your loan, you invoke the contingency, get your earnest money back, and walk away without penalty."
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Definitions are for educational purposes only and do not constitute financial or legal advice.