What is a contingency?
A contingency is a condition on the sale put into the contract by either the buyer or seller to protect against specific eventualities. Examples of common contingencies are: a requirement that the buyer obtain financing or sell the current home; the seller has a home inspection done; or the seller must repair certain items before settlement. Contingencies can be removed by an addendum to the contract, or they can expire if a time limit is specified in the contract.
Do you have more questions? Are there other terms you don’t understand? Click on “Ask Your Own Questions.”
What is earnest money?
Earnest money is a cash deposit buyers make when they sign a contract to buy a home. It makes the contract binding and signifies the intention of the buyer to complete the purchase. At closing, the earnest money becomes part of the down payment. If the buyer defaults without a good reason, as spelled out in the contract, the earnest money becomes payment for damages suffered by sellers and their agents.
The earnest deposit could be several hundred or even several thousand dollars, but usually no more than 5% of the purchase price. If the buyer’s contract is not accepted by the seller, the money is returned to the buyer.
Click on “Ask Your Own Questions.” We will be happy to help you assess your own home-buying situation.