Homebuyers In Northeast Los Angeles - Part FIVE: More About Contingencies
In the standard California real estate purchase contract, the Financing Contingency runs concurrently, and simultaneously with the Inspection Contingency.
The standard preprinted paragraph provides a 17 day contingency period for both; meaning that by the end of the 17th day after mutual acceptance of the purchase contract, you must be able to state that you have completed all your inspections and investigations AND that you have secured the needed financing to purchase the property AND that the property has appraised at the amount necessary to secure the financing.
That 's alot that has to happen in a relatively short period of time. And with additional regulations now in effect in the financial industry, many real estate professionals are suggesting that buyers negotiate for a longer financing contingency period.
Why is a contingency period important? Some investors like to call a contingency an "escape hatch". A contingency allows a buyer to cancel a purchase contract without penalty is the contingency is not satisfied.
If a buyer waives all contingencies, and then decides to cancel the purchase, the seller of the property may claim the buyer's good faith deposit as damages.
Also note that the standard preprinted California real estate purchase contract provides that all contingencies must be "actively removed" in writing.
The contingency is not removed automatically, even though the 17 day time period has passed, it remains in effect until it is removed in writing.
What is the seller's recourse if the buyer's removal of a contingency is overdue? A seller must issue a written Notice to Perform. (The required performance being the removal of the contingency.)
This article is not intended as legal advice. It is general information only. If you need specific contract contingency advice, please consult your attorney.
At Bob Taylor Properties, as your agents, we will help you meet the contractual time periods and manage the deadlines. We will guide you and consult with you throughout all negotiations.
