A contingency is basically a statement in your purchase agreement that you will buy a house if some specific conditions are met or some particular event happens. Some of these conditions are external to that property and some of them are directly related to the property.

Conditions that are external to the property that you're looking to buy could be based on your need to sell your own home before purchasing one that you're interested in, this is commonly known as a sale contingency. Other external contingencies might hinge on you getting a home loan or mortgage at a certain rate before you can buy the house you want.

Many other contingencies are directly related to the property that you're looking to buy. These contingencies are often related to the home inspection. Types of things that might delay or kill a purchase are discovery of lead paint, black mold, asbestos, roof leaks, or pests. Inspection contingencies may include a request for repair of some area of the house. Some areas have specific things that inspections look for that commonly appear as contingencies, for example, in Hawaii a termite inspection is fairly standard due to the prevalence of this pest in that area.

There are two basic kinds of condition that contingencies are based on, called suspensive and resolutive conditions. A suspensive condition puts the sale on hold until some event occurs. An example of a suspensive condition could be based on the buyer selling their own home to free up the funds needed to make their purchase. A resolutive condition is one that terminates the contract in the case of a certain outcome. This type of contingency could be used in the case of a home inspection uncovering.

All in all, contingencies exist to help take care of the "what ifs" of buying a home. You can basically put a hold on a property you like with the understanding that if something is fundamentally wrong with it or you can't get the funding you need to make the purchase, then you aren't stuck with buying it or breaking the contract and losing your earnest money deposit.