What Does Contingency Mean in Real Estate?

The term 'contingency' is quite common in real estate contracts, and it represents conditions that must be met for the transaction to move forward. Essentially, contingencies are 'safety nets' for both buyers and sellers. For instance, a buyer may have a contingency stating that the purchase is subject to a satisfactory home inspection. If significant problems are found during the inspection, the buyer can renegotiate or even back out of the deal without penalty. There are many types of contingencies, each designed to protect the interests of the parties involved in a real estate transaction.