Hawaii Pre-Licensing National Practice Exam 2025 – Your Complete Prep Guide

Question: 1 / 400

What is a contingency clause in a real estate contract?

A statement about the property

A requirement that certain conditions be met for the agreement

A contingency clause in a real estate contract is indeed a requirement that certain conditions be met for the agreement to be valid or enforceable. This clause protects the interests of the parties involved by specifying specific circumstances that must occur before the contract becomes binding.

For example, a typical contingency clause might stipulate that the sale is contingent upon the buyer obtaining financing or the property passing a professional inspection. If these conditions are not met, the buyer has the right to back out of the contract without facing penalties, ensuring that they are not locked into an agreement that could be problematic.

Understanding the significance of contingency clauses is crucial for both buyers and sellers as they provide a layer of security and clarity about the obligations and expectations of each party involved in the transaction.

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A regulation imposed by the government

A term for tenant obligations

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