Definition
A condition written into a purchase offer that lets the buyer back out and keep their earnest money if it is not met. Common contingencies cover financing, the home inspection, the appraisal, and the sale of the buyer's current home.
Why it matters
Contingencies are the buyer's insurance against paying for a house they cannot finance or that turns out to need a new roof. Waiving them makes an offer stronger in a bidding war but shifts real financial risk onto the buyer, including losing the deposit.
Example
A buyer offers $450,000 with a $10,000 earnest money deposit and an inspection contingency. The inspection finds $18,000 of foundation work, the seller refuses to credit it, and the buyer walks away with the full $10,000 returned. Without the contingency, backing out would have meant forfeiting the deposit.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.