Should You Waive Your Contingencies?
Have you heard someone say that you should waive your contingencies to make your offer more appealing? The California Residential Purchase Agreement (RPA) typically includes several contingencies that protect the interests of both buyers and sellers. Here are some of the most common contingencies found in the California RPA:
Loan Contingency
This contingency allows the buyer to cancel the contract if they are unable to obtain financing for the purchase. The contingency includes a deadline by which the buyer must obtain financing, and if they are unable to do so, they can cancel the contract and get their deposit back. If you waive this contingency and are unable to secure a loan for the home purchase, you may lose your deposit.
Appraisal Contingency
This contingency allows the buyer to cancel the contract if the property does not appraise for the purchase price. If the property appraises for less than the purchase price, the buyer can cancel the contract or negotiate a lower purchase price with the seller. Let’s say you waive your appraisal contingency when you offer to buy a house for $900,000, but it appraises for $850,000. The bank will only lend you $850,000, so will have to come up with the remaining $50,000 unless you are able to renegotiate the price.
Investigation of Property Contingency
This contingency allows the buyer to have the property inspected by a licensed inspector. If the inspection reveals any defects or issues with the property, the buyer can ask the seller to make repairs or negotiate a lower purchase price.
Sale of Buyer’s Property Contingency
This contingency applies when the buyer needs to sell their current home before they can purchase the new property. The contingency usually includes a deadline by which the buyer must sell their current home, and if they are unable to do so, they can cancel the contract and get their deposit back.
Review of Seller Documents
This contingency requires the seller to provide certain disclosures about the property, such as any known defects, hazards, or environmental issues. If the seller fails to provide the required disclosures, the buyer can cancel the contract.
These contingencies can be negotiated and modified during the real estate transaction, depending on the specific needs and interests of the buyer and seller. It is important to work with a real estate agent who can help you understand and navigate the contingencies in the California RPA to see if there are any you feel comfortable waiving.
