What is a common contingency in real estate contracts?

A common contingency in real estate contracts is that the buyer must obtain financing at a specified amount. This contingency is crucial because it protects the buyer by ensuring that they can secure the necessary funds to complete the purchase of the property. If the buyer is unable to obtain financing, this contingency allows them to back out of the contract without legal repercussions, thereby limiting their financial risk.

When a buyer includes a financing contingency in their offer, it typically outlines the terms under which they must secure a mortgage or other financing. This can include specifics about the loan type, interest rate, or loan amount. If the buyer is unable to meet these conditions within a designated timeframe, they can terminate the contract, retrieving their earnest money deposit in the process.

This aspect of real estate transactions is vital for maintaining fairness and ensuring that buyers are not obligated to proceed with a purchase they can’t financially support. This further underlines the importance of financial readiness in the real estate buying process.