Which statement is true about contingencies in a purchase agreement?

• A. Financing and inspection contingencies are commonly included.
• B. Only tax contingencies are allowed.
• C. Contingencies must always be lender-provided.
• D. Contingencies are optional.

Answer: (A)

Contingencies are conditions in a purchase agreement that must be satisfied for the deal to move forward. Financing and inspection contingencies are commonly included because they protect the buyer: the financing contingency gives time to secure a loan on acceptable terms, and the inspection contingency allows a professional to evaluate the property's condition and the buyer to request repairs, renegotiate, or back out if significant issues are found. This setup helps prevent the buyer from being locked into purchasing a property they cannot finance or that has hidden defects.

Other options don’t fit as well. A tax contingency isn’t a standard clause and taxes are usually handled through prorations at closing rather than a contingency. Contingencies aren’t provided by lenders; the financing contingency is the buyer’s protection, not something the lender supplies. And while some buyers may waive contingencies, they’re not universally optional in typical real estate transactions.