Home Selling in Torrance>Question Details

Matt, Home Seller in California

If a buyer's offer includes a contingency, now no longer valid but doesn't remove it, and then decides to cancel, do they forfeit their deposit?

Asked by Matt, California Sat Sep 7, 2013

A buyer made an offer on my home with a pest inspection contingency. If a pest inspection revealed no current infestations, but the buyer decided to cancel anyway for unrelated reaons, would the seller be permitted to keep the good faith deposit? Note: the buyer did not lift the contingency in writing.

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There are "contingencies' to look at in a Real Estate Transaction.
There is a financing contingency(appraisal and loan), and an inspection contingency(which includes pest inspections).
A buyer has many protections in the California Purchase Agreement and must release the contingencies.
Up until all contingencies are released, the buyer can cancel and have their Deposit returned to them.

After a buyer has removed all the contingencies( in writing) in the contract, the buyer is then obligated to move forward with the purchase. If they cancel the contract, (after signing a release of contingencies), the seller has the right to the buyer's good faith deposit , Being aware of a situation is not the same as releasing contingencies.
0 votes Thank Flag Link Tue Dec 10, 2013
Not sure how long past the contingency removal date you are, but it is always good idea for an agent to keep on top of the buyer & buyer's agent about removing these items and give a Notice to Perform if necessary. If you cannot work out a negotiation for the issues that the buyer has, you don't want to tie up the property for very long. Don't waste your time, cancel escrow and re-list so you can get your home sold.

Best of luck,

Tony Warfield
Associate Broker
3 Leaf Realty
0 votes Thank Flag Link Mon Sep 9, 2013
There typically is not a "pest inspection" contingency, but rather a general "inspection" contingency. This covers any and all possible inspections. There are generally additional contingencies for loan, appraisal, and investigations.
A pest report showing no current infestations would probably not be too relevant.
You and your agent should have asked for contingencies to be removed on the appropriate dates. If they refused, then you give the buyer a Notice to Perform.
Based on your comments and assuming you and the seller used a recent CAR RPA, it sounds like the buyer has the protection of the contingency clauses.
What is your agent (and his/her broker) telling you about this?
0 votes Thank Flag Link Sun Sep 8, 2013
Thanks for your comments. You're correct about the inspection contingency. It wasn't only about pest inspections. There were no other types of contingencies (loan, appraisal, etc.), however. I'm not sure why my agent didn't ask for removal of the inspection contingency when the time ran out. Without going into specifics, my question now is if one of the buyer's inspections revealed something that I had already disclosed in one of my inspections prior to submission of the offer, can the buyer cancel based on that item and receive back their deposit? In other words, can a buyer cancel without penalty based on a finding in their inspection that they should've known about before making the offer (even if the contingency was never removed)?
Flag Sun Sep 8, 2013
Hi iankeye,

The three primary contingencies of the CAR Residential Purchase Agreement [ Loan / Appraisal / Inspection(s) ] require "active" removal by the Buyer in writing; as opposed to a "passive" removal where a date simply passes and automatically removes the contingency.

Therefore, given what you have shared, and assuming there were no other addendums that modified any of the RPA's standard language regarding the three contingencies, I would be of the opinion the Buyer should keep the entire deposit amount. Para 14C may provide some additional clarity regarding your situation.

0 votes Thank Flag Link Sun Sep 8, 2013
If the Buyer never gave you a written Contingency Removal, the Buyer will not lose the deposit. It was important for your agent to ask for Contingency Removal form signed by the Buyer at the end of the contingency period. The buyer can walk away any time if that form is not signed.
0 votes Thank Flag Link Sat Sep 7, 2013
It can be complicated please feel free to contact me at:
Antony Gabriele
Realtor BRE#01739922
0 votes Thank Flag Link Sat Sep 7, 2013
Good afternoon,

Theoretically if the Buyer has contingencies left it would behoove you to release them and not tie your property up in lengthy litigation. Contingencies should be removed in writing, known as actively removed to be clean. If they are expired but not actively removed and the Buyer cancels they are potentially leaving their deposit in a vulnerable position. In order for escrow to release the deposit funds or any money for that matter, both sides will need to sign a release to distribute same. It seems like a negotiation should take place between the two sides to settle the dispute and not hold up you from selling your property to someone else. When in doubt a consultation with a real estate attorney will help clear it up for you. Find out from the attorney what your options are and seek the least costly option to you both in time and money.
Good luck and hope things work out for you.
0 votes Thank Flag Link Sat Sep 7, 2013
In normal contract there is a contingency for 10-15 days for a buyer to make due diligence.
During this period he does inspections and can also terminate the contract without any reason.

Ask your agent and he needs to explain you in depth.

Kadibhai (Kadi)
Better Homes & Gardens Gary Greene, Realtor Katy/Houston
Phone: 832-228-7978
Fax: 281-646 1841
Email: kadi.kadibhai@garygreene.com
Web: http://www.har.com/kadi
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0 votes Thank Flag Link Sat Sep 7, 2013
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