A contingency is a future event or circumstance that is possible but cannot be predicted with certainty. I look at contingency as a condition in a real estate contract. Typically when you buy goods from a store, you get 30 day money back guaranty. It is difficult to return a house. Therefore when you get into a contract, you can investigate the home condition during your contingency period. This allows you to evaluate the home condition and allows you to make sure it fits all your needs and wants. Many sellers will do up front inspections and seller reports so that buyer can be given comfort level about the property condition or a discomfort on the involved costs when they move into the home. Its all about knowing what you are getting into.
To understand impact of contingencies, it is necessary to know that when you make an offer on the home, you typically deposit 3% of the home price as deposit towards the home purchase. Protecting your deposit is important and contingencies protect your deposit as well as a wrong purchase from future unforeseen events. Typically contingencies buyer may have are – Loan Contingency, Appraisal contingency, Inspection Contingency, Seller disclosure contingency, Other disclosure contingency, title report contingency, or sale of your current resident that must happen to buy a new home – contingency. One can put any contingency they want, as long as other party can accept that. Even sellers have contingencies – like finding a new home contingency. To know more about the importance of contingencies, listen to this episode.