In one line: A contractual exit: the conditions that let a buyer back out with their deposit.
A contingency is a condition written into a purchase contract that must be satisfied for the sale to close, and whose failure lets the affected party walk away with their earnest money. The standard set is inspection, financing, and appraisal.
Each one is a negotiation lever with a clock on it. Shorter windows and fewer contingencies make an offer stronger and riskier in equal measure; in a bidding war buyers shave them, in a slow market they keep them all and use the inspection to reopen the price.
A worked example
A ten-day inspection contingency: the buyer inspects, finds a $12,000 roof, and has until day ten to ask for a credit, accept the home as it is, or cancel with the deposit returned. Silence past day ten means acceptance.
Questions people ask
What are the usual contingencies?
Inspection, appraisal, and financing are the everyday three, plus a sale-of-buyer's-home contingency when the buyer needs to sell first. Each has a deadline; missing it removes the protection, not the obligation.
Should I waive contingencies to win a bid?
Waiving the appraisal contingency means covering any shortfall in cash. Waiving inspection means buying blind. Both are common in a hot market and both are how buyers end up with a house they cannot afford to fix. Shorten the windows instead of removing them.