What is a contingency in a real estate contract?

A contingency in a real estate contract refers to a condition or a provision that must be met for the contract to remain valid and enforceable. Typically, contingencies allow one or both parties to pull out of the agreement without penalty if certain conditions are not fulfilled. Common examples of contingencies include financing contingencies, appraisal contingencies, or home inspection contingencies. These clauses protect buyers and sellers by establishing criteria that must be satisfied before the transaction can proceed, ensuring that both parties are more secure in their commitments.

The other choices do not accurately reflect the concept of a contingency. A guaranteed sale implies certainty in the closing of the transaction, which is not what a contingency ensures. A fixed price agreement relates to the set price of the real estate and does not incorporate conditions affecting the validity of the contract. An upfront payment refers to a deposit or earnest money and does not involve any conditional aspects that are characteristic of contingencies.