Title Contingency

A contractual term that allows a buyer to inspect and approve the Preliminary Title Report before the contract becomes binding. The buyer doesn't have the right to simply rescind the contract, though. First, the seller is given an opportunity to fix the defect. If the seller can do so prior to closing, the contract remains binding. If the seller cannot do so, then the contract terminates and the buyer gets their earnest money back.

Want to learn more? Check out my great blog post on how to read and understand a title report.

Financing Contingency

A contractual term that requires a buyer to secure financing before the contract becomes binding.  So if the buyer’s financing fails, the buyer gets the earnest money back. However, most contracts require the Buyer to take certain steps in order to retain this protection, such as applying within a certain number of days of contract.

Contingency

A contractual term that requires a certain act or event before the contract becomes binding on one party, usually the buyer.  Common contingencies include the Financing Contingency, the Title Contingency, and the Inspection Contingency.

Depending on the terms, the contingency may allow the buyer to walk away with a return of the earnest money (most commonly the inspection contingency). Other contingencies allow the seller an opportunity to cure the objection (title contingency) or allows the buyer to walk if something else happens (like a failure of financing).