Purchasing a home is a huge financial decision and can also be a stressful process. It is filled with negotiations, inspections and a sea of paperwork. The first weeks of an escrow are of primary importance, because it is in this period that the buyer must confirm financing, thoroughly investigate the property, and negotiate any repairs that the home may need. In order to allow the buyer time to complete these steps without fear of losing their deposit, the California Residential Purchase Agreement utilizes several contingencies, which give the buyer a little breathing room. When writing up an offer, buyers specify how much time they need for these important tasks.

The buyer inspection contingency, which has a default period of 17 days, is of primary importance to most buyers. This contingency allows time for the buyers to bring in professionals to thoroughly inspect the property and uncover any problems or defects that might exist. A good home inspector is all that most buyers need. These important professionals thoroughly inspect the entire house and yard, shedding important light on the condition of the property. If there is a concern over one aspect of the home, the inspector will suggest calling in a specialist to further investigate the issue. It is during the buyer inspection period that the buyer can ask the seller to repair items that the inspector has uncovered or ask for a credit on the purchase price so that they can complete the repairs once they own the home.

Getting a loan in this day in age is no easy task. Swinging from the era when most anyone could get a loan, even up to 100% of the purchase price, lenders have tightened their guidelines and made it more difficult for most people to get financing for a home purchase. The lenders not only delve into the personal finances of the buyer but also look closely at the value of the home, making sure that they are not lending more on the home than it is worth. This process can be lengthy and is accomplished during the loan and appraisal contingency periods, also set at a default period of 17 days in the purchase agreement.

Shortening or removing the contingency periods can be a great deal sweetener on a competitive sale. I recently represented some first-time home buyers who wrote their offer with no loan or appraisal contingency and only a five-day buyer inspection contingency. Their loan broker was confident that they could get their loan and they got the home for a a very competetive price, so we did not have a big concern about the home appraising. They did take on risk by going this route, but I am quite confident that this contingency angle is what ensured their accepted offer at a great price.

The most important fact about contingencies is that they continue to run until they are removed. In other words, if Monday is the day that you are to remove all contingencies but you don't do it, this does not mean that magically the contingencies are cleared. It is quite the opposite. The contingencies stay in affect until you choose to remove them or are forced to remove them through a "Notice to Perform" issued by the seller. If the seller never asked and you never removed them, then the contingencies would stay in effect until the close of escrow. In our hypothetical example, where Monday is the last day of your contingency period but you do not remove them, starting on Tuesday the seller could issue the Notice to Perform and you would have 48 hours to either remove them or your deal is cancelled and your deposit returned. The only way that you can lose your deposit is if you have removed the contingencies and then you are unable to complete the deal.

Make sure that you are using a competent real estate professional who can guide you in constructing your offer and setting your contingency periods. This is an important part of a successful real estate transaction and serves as your very most important safety net to ensure that you do not lose money on a deal gone bad.