Glossary

Contingency

Also known as: condition precedent to closing

A specific condition that must be satisfied, waived, or removed by a stated deadline for a party's obligation to close, or continue, under the PSA to remain in force.

Common CRE contingencies include financing, where the buyer's obligation to close is conditioned on securing a loan on acceptable terms, title, estoppel certificates from tenants, satisfactory zoning or entitlement confirmation, and completion of due diligence without discovery of a material adverse condition. Each contingency should specify who has the benefit of it and can therefore waive it, the deadline for satisfaction or waiver, and the consequence of failure — typically automatic contract termination and deposit refund, though some contingencies instead give the benefited party an election to proceed anyway. Buyers with financing contingencies are generally viewed as weaker in competitive bid situations than all-cash or pre-approved buyers, which is why sellers and their brokers often favor offers with fewer and shorter contingencies even at a modest discount to headline price.