When buying a property in California, the purchase contract often includes contingencies that protect buyers from unforeseen issues. These contingencies are conditions that must be met before the sale can be finalized. Here are the five contingencies that can be found in a California real estate purchase contract:

1. Financing contingency: This contingency allows the buyer to back out of the sale if they cannot secure financing for the property. The buyer has a specific amount of time to obtain a loan commitment from a lender. If they cannot obtain financing within that time, they can cancel the contract without penalty.
2. Appraisal contingency: This contingency allows the buyer to cancel the sale if the property does not appraise for the purchase price. If the property appraises for less than the purchase price, the buyer can negotiate with the seller to lower the price or cancel the contract.
3. Inspection contingency: This contingency allows the buyer to have the property inspected by a professional. If the inspection reveals any issues with the property, the buyer can negotiate with the seller to have the issues fixed, ask for a credit or reduction in price, or cancel the contract.
4. Title contingency: This contingency allows the buyer to cancel the sale if there are any issues with the property's title. If there are any liens, easements, or other encumbrances on the property, the buyer can cancel the contract or negotiate with the seller to resolve the issues.
5. Homeowner association (HOA) contingency: This contingency applies if the property is part of an HOA. The buyer has a specific amount of time to review the HOA documents and rules. If the buyer finds anything they are not comfortable with, they can cancel the contract without penalty.

While contingencies can protect buyers from unforeseen issues, they can also make a non-contingent offer more attractive to a seller. A non-contingent offer means that the buyer is willing to purchase the property without any contingencies. This type of offer can be appealing to a seller because it guarantees a faster and smoother transaction. However, a non-contingent offer can be risky for the buyer, as they would be responsible for any issues that arise after the sale. It is important to weigh the benefits and drawbacks of a non-contingent offer before making an offer on a property.

Typically, the only appropriate time to remove all contingencies on an offer are:

1. You're satisfied with all the inspections, reports and documents provided in the listing package
2. The property and it's title are clean & turn-key
3. When other non-continent offers are expected

Advising clients to write offers without contingencies may seem counter-intuitive to the buyer's best interests, which in most cases it is, unless you're in a sellers market like San Francisco or the Bay Area. In any market where buyer's routinely compete for properties, the offers that rarely win are those with a litny of contingencies or clauses for buyers to 'pull out' if something doesn't work for them.

As a seller, you can understand why accepting one offer where a buyer has the ability to walk away at any point might be less appealing than the buyer 100% committed to purchasing the property. Even if the second offer is a slightly lower, it's hard to put a price on guarantee.

All in all, your agent needs to be savvy at their utilization of contingencies in order to protect a buyer from potentially expensive and litigious situations during & after escrow. All properties are different and come with their own swath of potential challenges.

If you have any questions, text me.

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