What is the consequence if a contingency clause is not met?

In real estate transactions, a contingency clause is a condition that must be fulfilled for the sale to proceed. If the contingency is not met, the implications can vary based on the terms outlined in the contract.

When a buyer has a contingency and it is not satisfied—such as a financing contingency where the buyer fails to secure a loan—the buyer is typically entitled to a refund of their earnest money. This is because the failure to satisfy the contingency releases the buyer from their obligation to proceed with the purchase. The earnest money is intended to show the buyer's good faith in entering the contract, but it is not intended to be a penalty if the conditions change. Instead, it acts as a safeguard, allowing the buyer to get their deposit back should the conditions of their offer not be met.

In contrast, if the contingencies are satisfied, then the transaction continues as planned. It's essential for buyers to understand these contingencies, so they know their rights regarding earnest money if the deal falls through.