fsbo
Contingency
A condition in a real estate contract that must be satisfied for the deal to close, allowing one party to terminate without penalty if not met.
In depth
Contingencies are conditional clauses that protect a party until a specific item is verified. Common buyer contingencies include financing, inspection, appraisal, title, and sale of the buyer's current home. Each has a deadline; missing the deadline typically waives the contingency. Misconception: a contingency is not a free pass to back out; the contingency must actually fail or the buyer must work in good faith to satisfy it. Practically, in FSBO and seller-financed deals, sellers should limit unnecessary contingencies and shorten deadlines to reduce uncertainty. Buyers using seller financing avoid the financing contingency, which is one reason sellers prefer them. Inspection contingencies are nearly universal but can be limited to material defects only. Earnest money is at risk once contingencies are removed.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.