Contingencies and Contingency Removal

When working with buyers and sellers, it is important that you as the professional have the knowledge and ability to explain the effect of contingencies and the removal of contingencies. Contingencies are much like rights to cancel in a purchase contract (California Association of Realtors form RPA). And YOU as the buyer’s professional or the seller’s professional want to have a clear and concise ability to explain the effect of removing contingencies as it pertains to the buyers deposit funds.

Contingencies are commonly in existence for investigations of the property such as home inspections, termite inspections, sewer camera inspections, HOA document review, ability to obtain insurance, etc. Another contingency would normally exist for the appraisal, as well as another for the loan.

When a buyer removes their contingencies, they are signaling to the seller that they intend to not cancel based on that contingency being removed. For example, when an appraisal is conducted, and the value “comes in”, a buyer may at that time elect to remove their appraisal contingency. When they do so, they are giving up their right to cancel based on the findings of the appraisal.

Sellers have a right to have certainty of the buyer’s commitment to close escrow on the property. And buyers have a right to know what they are committing to when they remove their contingencies.

Contingency removal is a normal step in the purchase process, but it is one in which the buyer can be uncertain as to how much weight is riding upon their decision to remove their contingencies. The goal of the video on this page is to help Realtors in California have a better understanding of what they are advising their clients with regard to the contingencies and the removal of contingencies.