Contingency

Key Takeaways

• A contingency is a condition written into the contract that must be satisfied, waived, or allowed to expire before the parties are locked into closing.
• Every contingency belongs to one party, and only that party can give it up. An inspection contingency protects the buyer, so the seller cannot strike it after acceptance.
• Contingencies run on deadlines and require a specified form of notice, which is why timing is the most heavily tested part of the topic.
• Washington adds a statutory escape that works much like a built-in contingency: three business days to deliver written notice of rescission after receiving the seller's disclosure statement (RCW 64.06.030).

What It Means

A contingency is an if-then clause in a real estate contract. The parties agree to close, but only if a stated thing happens first: the inspection comes back acceptable, the lender approves the loan, the appraisal supports the price, the buyer's current home sells. Until that thing happens, the deal is signed but not yet certain.

Two features do most of the work. First, a contingency belongs to one party, and only that party can give it up. Second, a contingency carries a deadline and a required method of response, usually written notice within a set number of days from Mutual Acceptance.

When a contingency is satisfied or waived, it drops out and the contract keeps going without it. When it fails and the protected party gives proper notice in time, that party can normally terminate and recover the Earnest Money. When the deadline passes with no notice at all, most modern forms treat the contingency as waived, and a buyer who assumed that silence meant protection can discover the protection is gone. Read the clock, not the intention.

How It Works in Washington

In Washington, contingencies themselves come from the contract rather than from a statute, so the form set controls the deadlines and the notice mechanics. Most residential transactions use the Northwest Multiple Listing Service forms, where inspection, financing, title review, and sale-of-buyer's-home conditions each carry their own day count running from mutual acceptance. Read the specific form, because the day counts are not uniform across them.

One protection does come from statute. RCW 64.06.030 gives a buyer of residential real property three business days after receiving the seller's disclosure statement to deliver written notice of rescission to the seller, and provides that the statement is deemed approved and accepted by the buyer if that notice is not delivered within the three business day period. It behaves like a contingency the legislature wrote for the buyer, except that it runs from receipt of the Sellers Property Disclosure Statement rather than from mutual acceptance.

The money side has its own Washington rules. If a contingency fails and the agreement terminates according to its own terms before closing, WAC 308-124E-110 allows the firm to disburse the deposit as the agreement provides, without a separate written release. If the parties instead disagree about who is entitled to the money, RCW 18.85.285 requires the Designated Broker to notify all claiming parties of the intended disbursement before paying anyone.

Example

Ken and Aisha reach mutual acceptance on a Bellingham house at $610,000 on May 4, with $12,000 in earnest money, a 10 day inspection contingency, and a 30 day financing contingency.

The inspector finds a cracked heat exchanger on May 9. The buyers are inside the 10 day window, so on May 12 they deliver written notice asking for a repair or a credit. The seller agrees to a $3,800 credit, the parties sign an addendum, and the inspection contingency is satisfied on May 13.

Financing is the harder one. On June 1 the appraisal comes back at $588,000 and the lender will only lend against the lower value. The financing window runs through June 3, so the buyers deliver written notice of termination on June 2 and the $12,000 comes back to them under the agreement's own terms. Had they waited until June 4, the contingency would have expired, the contract would have stayed alive without it, and the $12,000 would have been at risk.

Common Mistakes and Exam Traps

• A contingency does not make the contract invalid or unenforceable. The contract binds from mutual acceptance; the contingency only conditions the duty to close.
• Waiving a contingency and satisfying a contingency reach the same place by different routes. Waiver gives up the protection; satisfaction means the condition was met.
• Silence usually waives rather than preserves. Under most modern forms, a party who lets the deadline pass without notice is treated as having accepted the condition.
• A contingency is a contract clause, not an interest in land. It does not run with the property the way a restrictive covenant or an easement does.