What are Contingencies When Purchasing a Property?
What Are Contingencies? A contingency is a condition that must be fulfilled before the sale of a home can move forward. In California, these conditions are typically found in the buyer's purchase offer with specific dates outlined and your Realtor will help you negotiate their timing and terms. These contingencies are to protect the buyer as the transaction moves through the escrow process.
Real estate contingencies typically fall under 3 major categories:
Home inspection and Seller's Disclosures review (avg. 7-14 days).
Appraisal (avg. 17-21 days)
Loan approval (avg. 21-30 days)
Think of these contingencies as a buyer's safety net. If an inspection reveals a major problem, if a home does not appraise at the sale price or if the buyer's loan is not approved, a buyer can back out of the purchase without penalty.
Note: "All cash" buyers will often make an offer without an appraisal or loan approval contingencies and shorten the length of the escrow which can make their offer more attractive. However, cash offers are often lower than financed purchases making them less attractive to some sellers.