One of the most confusing aspects of purchasing a home is determining when a contingency period starts and ends. In this article, I'll attempt to demistify the confusion allowing you to clearly understand the time frame you have to work with when buying your first, second, or even third home in the Golden State.
Within California when one submits an offer to purchase real estate, unless otherwise specified, they are submitting what is called a contingent contract
.Â This means you're agreeing to purchase the Property you've selected contingent upon certain conditions being met. Sometimes this is referred to as a "conditional contract." Though, in real estate, such contracts are always referred to as a contingent contracts. A few examples of contingencies that may pertain to your situation are:
- The home must appraise at the level you're buying it for.
- The home must be free of major defects or previous major repairs.
- You must be able to qualify for a loan to purchase the home.
- Etc., etc. There are a myriad of reasons you are not purchasing a property immediately, but agreeing to do so after giving it a thorough inspection to make sure it meets your criteria.
Every real estate transaction is different and some transactions have no contingency periods at all.Â But, what is great about a contingency period is that it gives you, the Buyer, time to examine the home from rooftop to foundation and to decide if the home, you've made your contingent offer on, is right for you. One would never purchase an expensive used sports car without first taking it to a mechanic to make sure it was in tip top shape. The contingency period in real estate is quite similar, in that it allows you to make sure you're getting what you pay for.
Real estate contracts can be confusing and filled with legal jargon, but in California, unless otherwise stated
, the contingency period will start the day after the Sellers accept your offer to purchase their property. With that in mind, if the Sellers of the property you're purchasing accept your purchase offer, and then sign your offer at 9 a.m. on a Monday morning, your contingency period will begin at 12:00 a.m. on Tuesday (the following day), and end seventeen (17) days later. The only caveat to this time period is that should the seventeenth (17th) day, or any other length of time agreed upon, end on a Saturday, Sunday, or legal holiday, the contingency period will automatically expire on the next business day.Â
For example, if a Buyer places an offer to purchase a Property on May 3, 2010 and their offer is accepted by the Seller on May 6, 2010. Â Their contingency period will begin on May 7th. In this case, seventeen (17) days later would be Sunday, May 23, 2010. Remember, Saturdays, Sundays, and legal holidays do give some added benefit to the Buyer in the form of extra days.Â
Since May 23, 2010 will not count, as it is the last day of the contingency period and it falls on a Sunday, the next day, Monday, May 24, 2010 will serve as the final day of the contingency period. This will occur automatically with nol action required by the Buyer or his or her Realtor.
Of course not every Realtor remembers the rules, so if the last day of your contingency period does end on a Saturday, Sunday, or legal holiday, it's a good idea to make sure the Seller's Realtor is aware of that fact, so that no unnecessary stress unfolds during the final days and hours of the contingency period. Â
Confused? Don't be. This is but one reason why you have a real estate agent, who's job it is to make sure no deadlines are missed and that your well protected.
With that in mind, unless otherwise specified, this means you have seventeen (17) days from the start of the contingency period, to the time you must remove all contingencies, cancel the transaction, or request a contingency extension. However, a word of caution is needed here. Keep in mind the Seller is under no obligation to offer you a contingency extension, and it is often the case that such requests are denied. Therefore it is best to avoid putting one's self in that position all together.
This is why it is crucial that you not miss a contingency period time frame by failing to remove contingencies or cancel ones purchase contract within the given time period specific to your purchase contract.Â Being negligent in this area can have grave financial consequences. It is possible you may forfeit your earnest deposit and be liable for other damages, simply by being late in removing contingencies or by not canceling your offer to purchase in a timely manner.
This again, is but one of the primary reasons it is crucial to work with an experienced and responsible real estate agent.Â Sellers can be understanding, but they can also be opportunists, especially in a tough real estate market, and a minor misjudgment of dates can have a major effect on your wallet.
Now that you have a grasp on when your contingency period begins and when it ends, make sure to order all of your home inspections and speak to your loan officer, as soon as possible after a Seller accepts your contingent purchase offer.
For more in-depth information, please feel free to contact me anytime.Â Lastly, keep in mind all real estate contracts are unique with no two contracts being the same. In California the standard contingency period is seventeen (17) days.Â Though, when drafting a purchase contract for residential properties the option exists to ask the Seller for a greater number of days. For example, It is quite common for Buyers to ask for twenty-one (21) days, to allow for extra inspection time.Â Though again, a Seller is under no obligation to grant you this request and if there is a popular property you and your Realtor feel will receive multiple purchase offers, it is best to present the Seller with the strongest offer possible.
Requesting a longer contingency period may weaken your position, if the Seller is comparing your offer to that of another Buyer, all else being equal. And, in nearly all cases, seventeen (17) days is ample time to have the home you've selected thoroughly vetted and for any additional negotiations, such as repair requests to be presented to the Seller.
Thank you for following along. If there is a particular topic you'd like to see me write about, here, in the future, please let me know!
Eric M. Abrams
California Real Estate Broker
510.332.6314 Direct East Bay
415.669.4358 Direct San Francisco
Prudential Highland Partners
342 Highland Avenue
Piedmont, CA 94611
CA DRE# r01862927
- Sitting Board Member on Oakland Board of Realtors MLS Advisory Board
- Certified International Fine Homes Agent
- Green Technology Home Consultant and Green Living Agent with first hand experienceÂ Â Â Â Â Â Â Â using the latest technology, such as fuel cell residential power generation, solar, and wind turbine, water recapturing, etc.
The above represents the opinion of Eric M. Abrams only.Â I am not an attorney nor a certified public accountant ("CPA"). It is essential to check all of the facts above with an attorney and a CPA prior to taking any action, whatsoever. The above article is written solely for entertainment purposes and may have material errors contained herein.Â It is essential that the information above not be relied upon in any manner without first contacting a qualified attorney and CPA who are able to guide you through the pros and cons of the various issues discussed above.