What is a Contingency?

Most contacts have contingencies that allow buyers to walk away from a property. Two examples are if the home inspection results are unsatisfactory to the buyer or buyer cannot obtain financing. But, if a buyer decides to cancel the contract for a reason not covered by a contract contingency, earnest money is generally forfeited to the seller. These contingencies are designed to keep you safe from the unexpected, and you can negotiate these conditions with the seller before signing the contract. Chances are getting cold feet won't be a contingency, so carefully read your contract and know legitimate acceptable reasons for backing out. Buyer's stand to lose their earnest money if they jump ship on a real estate transaction. Earnest money gives sellers monetary assurance that a buyer won't back out of the contract without valid cause.

Typical Contingencies

Backing out of a home loan can be a sticky legal situation. When you signed your contract for the home there were certain contingencies associated with buying the property. These could include:

HOME INSPECTION

This contingency allows you to walk away from a home with your earnest money if the inspection reveals unsatisfactory housing conditions.

FINANCING

This contingency assures that you receive an earnest money refund if you don't receive proper financing in time. 

SALE OF YOUR HOME

If you're unable to sell your house before closing on your new one, this contingency lets you walk away with your earnest money. Many sellers aren't fans of this contingency given the unpredictable nature of real estate.