Colibri Real Estate 30-Hour Alabama Post License Practice Exam

What is the most common contingency found in a sales contract?

1. Home sale contingency

2. Financing contingency

3. Inspection contingency

4. Appraisal contingency

The correct answer is: Financing contingency

The financing contingency is often considered the most common contingency in a sales contract because it protects the buyer by ensuring that they have the ability to secure a mortgage or funding to complete the purchase. If the buyer is unable to obtain financing, this contingency allows them to back out of the contract without facing penalties, thus reducing their financial risk. This type of contingency is essential in real estate transactions, as many buyers rely on mortgage loans to fund their home purchases. It also provides sellers with an understanding that the sale is dependent on the buyer's financial capability. While the other options represent important contingencies that can be included in a sales contract—such as the home sale contingency, which is relevant for buyers needing to sell their existing home; the inspection contingency, which allows for negotiations if serious issues are uncovered during the home inspection; and the appraisal contingency, which ensures the home appraises for the agreed-upon price—all of these is secondary to the financing contingency in terms of frequency and critical nature in facilitating a sale.