Contingency
National Real Estate Exam glossary · Contracts
Definition
A condition that must be satisfied before a contract becomes binding or before a party is obligated to close. Common examples include financing, inspection, and appraisal contingencies; if a stated contingency fails, the protected party may withdraw, typically recovering earnest money.
Contingency in plain English
A contingency is an 'only if' condition built into a real-estate contract — a box that must get checked before the deal is locked in or before you're forced to buy. The most common ones say things like 'only if I can get a loan,' 'only if the inspection looks okay,' or 'only if the home appraises for enough.' It's your safety escape hatch: if the condition isn't met, the protected person can back out of the deal and usually get their earnest-money deposit (the good-faith cash they put down) returned. This lets buyers commit to a purchase without gambling everything before they've confirmed the important details.
Learn these first
Related National Real Estate Exam terms
National Real Estate Exam practice questions · National Real Estate Exam flashcards · National Real Estate Exam study guide