In a real estate contract, what does it mean if a buyer has a contingency for financing?

A contingency for financing in a real estate contract indicates that the buyer needs to secure a loan in order to complete the purchase of the property. This condition allows the buyer a certain period to obtain financing, assuring them that if they cannot secure the necessary funds, they can back out of the transaction without penalty.

This provision serves to protect the buyer's interests, ensuring that they are not obligated to proceed with the purchase if they are unable to obtain a mortgage or other financing. It is a common practice in real estate transactions to include such contingencies, as it provides buyers with peace of mind and prevents them from entering into a deal that they may not be financially capable of fulfilling.