I am writing this as there seems to be much confusion, in California at least, about contingency periods with regards to a residential property purchase. It may be obvious to most of us yet......
The contingency period for buyers in California when using a CAR (California Association of Realtors) residential purchase agreement is 17 days for the buyer's inspection, loan and appraisal contingencies.
So, on the 17th day those contingencies expire and the buyer's earnest money deposit could now belong to the seller.... right?
WRONG.
All contingencies must be removed, IN WRITING. If contingencies have not been actively removed, the buyer may be able to cancel at any time, without risking their deposit.
Contingencies run with the contract until the contract is cancelled, escrow closes or the contingencies are removed by the buyer, in writing. (Time frames can change by prior written agreement or by failing to supply required disclosures when due). Even when contingencies are removed that the Seller will not be entitled to the buyer's deposit yet, properly reoving the contingencies will bring the seller closer to securing the deposit if the deal goes south.
It is up to the agents to make certain that all contingencies are removed at the appropriate intervals....in writing.
Use CAR form CR(Contingency Removal) to remove your clients contingencies or CAR form NBP ( Notice to Buyer to Perform) to demand removal of buyer contingencies. After the "Notice to Perform" has been delivered and contingencies are not removed, the seller may have the right to cancel the agreement.
Many times, a buyers agent will not remove contingencies. It will be up to the seller, based on your advice, to decide the correct way to proceed.
In this market, most will simply hang on and hope for the best. It is up to you to let them know that the buyer's earnest money deposit, in most cases, will never make it to their pocket if the deal doesn't close.
There are many more factors that can effect the outcome of a transaction when it comes to contingencies and many different scenarios. I am no attorney and when questions arise, it is best to contact your attorney or the legal hotline form CAR or your local association.
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