Contingency

A contingency is a condition in a purchase contract that must be met for the sale to go forward. If it is not met by its deadline, the protected party can usually cancel the deal without penalty, which typically means the buyer gets the earnest money back.

Common contingencies cover the home inspection, the buyer's loan, and the appraisal. Each has a deadline. A buyer with $10,000 down on a $500,000 home who cancels inside an open contingency, following the contract's notice rules, is usually entitled to a refund.

Once a contingency is removed or its deadline passes, that protection is gone. Backing out later for the same reason can put the deposit at risk. This is why some buyers talk about earnest money "going hard". Details vary by state and by contract form.