What is a contingency in real estate?

A contingency is a condition built into a purchase contract that allows a buyer to exit the deal — usually without losing their earnest money — if that condition isn't met. Contingencies protect buyers, which is why sellers often prefer offers with fewer of them.

Common contingencies in Texas contracts

• Financing contingency: Allows the buyer to exit if their loan falls through. Most lender-backed offers include this.
• Inspection / option period: Texas uses an option period instead of a formal inspection contingency — the buyer pays an option fee for the unrestricted right to terminate within the option window.
• Appraisal contingency: Protects the buyer if the home appraises below the contract price. Without this, the buyer owes the difference in cash.
• Sale contingency: The purchase is contingent on the buyer selling their current home. Sellers often dislike this — it adds uncertainty and can delay closing.
• Title contingency: Implied in most Texas contracts — the deal can be terminated if title cannot be conveyed free and clear.

Contingencies in a competitive market

In a multiple-offer situation, buyers sometimes waive contingencies to make their offer more attractive. This can work, but it comes with real risk. Waiving the appraisal contingency means you're on the hook for any gap between appraised value and contract price. Waiving financing means if your loan falls through, you lose your earnest money. These are decisions to make with clear eyes — not out of panic.