When Should I Remove My Home Purchase Contingencies in California?

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What are real estate contingencies?

As we discussed in our inspection contingency article, a contingency is a condition that must be fulfilled before the sale of a home can close. In California, these conditions are typically found in the buyer’s offer. The most common form we use to write an offer is California Association of Realtors (C.A.R.) Form RPA-CA.

Real estate contingencies typically fall under three major categories: appraisal, inspection and mortgage/loan approval. If a home does not appraise at a certain value, if an inspection reveals a major problem, or if the buyer cannot obtain adequate financing, a buyer can back out of the contract without penalty. That penalty? Your earnest money deposit.


How do my real estate contingencies help me?

Your contingencies are your safety net – protecting your good faith (“earnest money”) deposit

In California, the amount of earnest money you’ll put on the line is typically a matter of local custom. In the San Francisco Bay Area, for example, customary earnest money is 3% of the purchase price. Many Bay Area sellers will not accept an offer if the proposed earnest money is not at least 3%. 

In higher-priced areas like San Francisco, Los Angeles, and San Diego, earnest money can easily exceed $40,000. That’s a decent chunk of change to put down. That’s what your contingencies are protecting. It’s important to remember that your earnest money will be applied to your purchase.

When is it safe to remove my home purchase contingencies?

The short answer – only when you feel absolutely comfortable doing so! When buying a home, it is vital that you work with your knowledgable agent and your lender to get a complete picture of your purchase. Do you feel comfortable removing an inspection contingency after reviewing the home inspection report? Is your lender confident that your loan will be approved? How does your offered purchase price compare to recent sales of similar homes nearby? 

We at Yaypad suggest only removing contingencies when – after reviewing all important matters – it both makes sense and you’re 100% comfortable doing so.  If you have any reservations, keep those contingencies in place, even in a competitive seller’s market.

If I've Removed My Contingencies But I Back Out, Does the Seller Get to Keep My Earnest Money?

Not necessarily. Was there a new item / issue / disclosure that arose during the course of your purhase and after you had removed your contingencies? Was there anything else out of the ordinary that occurred to cause you to sour on the home? Chat with your agent to determine next steps. 

Even though a seller can keep a good faith earnest money deposit in some circumstances, that does not always necessarily mean they will. Communication is important during any and all purchases. That’s where a great agent comes in

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