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Contingencies

contingencies and timeframes - clockContingencies are clauses that permit one member of the purchase agreement to get out of it if certain conditions aren’t met.

What are the typical contingencies?

Most of the time, it is the buyer who has contingencies. The typical ones we see (when we have them at all) are for

  • loan (sometimes called finance),
  • appraisal
  • property condition. Property condition includes inspections, but is broader than just that.
  • approval of documents and disclosures (HOA documents, the Preliminary Title Report and related documents, seller disclosures, and more)
  • sometimes if there is a solar lease, the buyer may have a contingency that he or she is approved to take it over

The contingency period

The Contingency Period is the time allowed by your Purchase Agreement to obtain financing, perform inspections and investigations, and satisfy any other contingencies to which your purchase is subject.  In our area, the seller ordinarily provides a full disclosure package with inspections upfront, and often buyers waive the property condition contingency. That’s not always the case, those. When there are loan or appraisal or other contingencies, most of the time they range between a few days and 2 weeks.

Some buyers want extremely long time periods. Home sellers often don’t want to deal with that much risk, so it will negatively impact the odds of success. (“Long” is relative, but anything over 2 weeks is considered long in SIlicon Valley – and sometimes it’s much shorter than that.)

When the local real estate market is very overheated, it is not uncommon for home buyers to waive all contingencies. We don’t advise doing this as it’s dangerous, but if there are 10 offers and 8 have zero contingencies, we know that including contingencies may make it extremely challenging to get an offer accepted.

Sellers may request contingencies, too. The most common seller contingency is for finding a replacement property. The challenge if homeowners want to sell one property and buy another – most do not want to move twice. The majority of home buyers won’t agree to that condition, though, so it makes selling a home more challenging. We do not recommend making that condition part of the seller’s requirements of sale.

 

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