What is a Contingency? - CV Escrow
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What is a Contingency?

Real estate transactions are filled with many potential pitfalls for buyers, sellers and lenders, and that is why there are so many catch-alls in-place to safeguard these transactions.

You have likely heard the word “contingency” come up during the buying or selling process, but what exactly are contingencies and why do they matter? Here, we will take a closer look at some of the most common situations.

Simply put, a contingency is a condition set forth in the Purchase Agreement that gives the buyer(s) a way out if certain conditions are not met once their offer is presented. A contingency also means that their deposit will be refunded and the contract nullified.

Some of the most common contingencies include the appraisal, building inspection, financing or mortgage, and clean title, but that list is far from exhaustive.

It would be virtually impossible to cover all of the different contingencies that might arise during a real estate transaction, but think of it this way: contingencies are a type of insurance policy so that buyers do not become locked in when something agreed upon needs to be completed.

If a buyer needed to sell their current home before they could close on the new one, for example, that would be another type of contingency. They help to alleviate the uncertainty of financial responsibility and also protect both the buyer and seller from any surprises during the transaction.

Contingencies are very much dependent on specific timelines that are agreed upon in the purchase agreement. And once approved, both the buyer and seller are required to sign a document stating that the contingency has been satisfied, which effectively removes that contingency from the purchase contract. This signed document is given to both the real estate agent and escrow.

One important thing to keep in mind is that if the buyer and seller fail to sign-off on the contingency before the deadline arrives, the contingency is considered accepted. So, be sure to keep the lines of communication open with your real estate agent to ensure you are satisfied with the result and are not caught off-guard by something you expected to be completed. Once all contingencies are removed, escrow is able to close.


There are a lot of moving parts during the escrow process, and understanding contingencies is just one piece of the puzzle. If you have additional questions or would like help understanding escrow in more detail, please contact us. We are here to help in any way we can!