1. A financing contingency in a purchase agreement protects the:
Answer & explanation
Answer: C. A financing (mortgage) contingency lets the buyer cancel without penalty if unable to secure the specified loan by the deadline.
contracts
contingency
A contingency is a condition in a contract that must be satisfied before the parties are obligated to perform. If the condition is not met within the stated time, the protected party can usually cancel the contract and recover any earnest money. Common real estate contingencies cover financing, home inspection, appraisal, and the sale of the buyer's current home. Contingencies should state clear deadlines and how a party gives notice.
- Exam tip
- Know who a contingency protects (usually the buyer) and that missing a deadline can waive it. Contingencies make a contract conditional, not void.
- Example
- The buyer's offer is contingent on obtaining a 30-year loan at 7% or less within 21 days; if the loan is denied, the buyer can cancel and get the deposit back.
Related terms & state variants
Sources
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Last verified: 2026-10-23