Home Buyer Contingency Periods—Explained! | San Diego Real Estate | The Real Estate Jedi™


What are contingency periods, and what are they for? When you’re submitting an offer in California,
the default time periods for your “contingency period” is seventeen days for property condition
contingencies, termite inspections, appraisal contingencies, seller disclosures, local area
and natural hazard disclosures, and all due diligence on the property. Now keep in mind
this is a negotiable time-period, so you could make that TEN days, THIRTY days, FIFTEEN days—whatever
you want to offer, but by default, it’s seventeen days. Got it? So what this means
for you is that starting the day after acceptance of your offer, you have seventeen days to
get a home inspection, pool inspection, or any other type of inspections you choose,
OK? As well as review all the seller’s disclosures, the natural hazard disclosures, local area
disclosures, and conduct any other investigations on the property that you would like etc. During this time period as well, the appraisal
should have been completed, at which time you’ll know whether the property was appraised
for at LEAST your agreed-upon sales price, and if there are any REQUIRED repairs to be
completed in order to satisfy the appraisal. OR for example, if you’re not comfortable
with something in the home inspection report —for example if it says the toilet in the
master bathroom is loose, or that there is a roof leak, or the water pressure regulator
is going bad, or there is a GAS LEAK in the attic, ETCETERA — you get the idea—you
will have the opportunity in this seventeen day time-frame to either A) address the concerns
with the seller and NEGOTIATE repairs, or a credit or price reduction, or B) back out
of the deal if you feel your the issues are not curable. Same thing with the seller disclosures
or any other disclosures or information you come across—if something is insurmountable
for you, you have the option to back out and in most cases, receive your full Earnest Money
Deposit refund. The whole point of this time-period is to
ensure you as the buyer are completely comfortable with ALL of the information about the property,
have the chance to address any concerns and RE-NEGOTIATE with the seller based on newly
obtained information, and to protect you and your deposit if you choose to back out. Now look, even after the seventeenth day,
the contingencies don’t automatically drop off—in order for them to be removed, you’ll
have to SIGN a contingency REMOVAL form. When you sign this form and remove these contingencies,
you are essentially saying to the seller: “Hey, I reviewed the disclosures, I’ve
had all the inspections I want to have, I’ve come to an agreement with you on the repairs
I’ve requested, (if any), I’ve conducted all the investigations I wish to conduct,
and I’m confidently MOVING FORWARD and I plan on CLOSING this deal.” Now there’s also a default twenty-one day
contingency period for being approved for your loan— IF you’re obtaining a loan
to purchase the property. This means that even if you removed the other contingencies,
but the loan get’s denied, then you and your deposit are STILL protected, so long
as you have not removed the loan contingency yet. But listen—let’s say after you have removed
ALL your contingencies— let’s say you had your home inspection and everything looked
great, all the disclosures looked great, the appraisal came in at full value, you got approved
for the loan—let’s say AFTER all of this and AFTER you removed all of your contingencies,
you just decide, “Hey, you know what, I think I’m just going to back out of this
deal. I don’t want this property anymore.” Well in that case—you’re putting your
Earnest Money Deposit at RISK and you may be liable for other damages as per the contract. So the bottom line is, you have by default,
seventeen days to have all your inspections done, negotiate for repairs or credits, review
disclosures, obtain an appraisal at full value, and do all of your due diligence. If anything
doesn’t look right to you or you decide not to move forward with the deal, then you
can back out prior to removing these contingencies and under normal circumstances, you’ll get
your deposit back with no repercussions. Now, you might be out the cost of the home inspection
or appraisal, but hey, if something’s really wrong with the property, that’s cheap insurance
compared to moving forward with a purchase that you’ll regret. If you have any questions about contingency
time-periods or anything else Real Estate-related in Southern California, feel free to reach
out to us or visit our website for tons of other great information. I’ll see you in the next video! 😀

2 comments

  • If sellers live in the home that they're selling, what is the time frame for them to vacate the property once the contingent period is about to expire and funds are about to be distributed?

  • Great info. Thank you!

    For the Seller: once the time frame for contingencies has passed – can they walk away from the deal, if they choose?

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