What's a contingency period?
In Real Estate, A Contingency period is the time frame in which a home buyer has to preform on a specific contractual item. In example; A buyer has 17 days to inspect and investigate the home's condition and seller disclosures before having to remove their inspection contingency. Once the contingency is removed, the buyer can no longer back out of the purchase without losing their earnest money deposit for the reason being dissatisfied with the condition of the home or any seller disclosures.
By default and unless otherwise specified by the seller and buyer on the purchase contract, a 17 day period is automatically set for both the Appraisal and Property inspection contingencies, and a 21 day loan contingency period on a California purchase agreement.
Can I change the contingency period?
The only way to shorten or lengthen the contingency period is to create a contingency period addendum and have all parties sign off on it.
What happens if the contingency period expired but the buyer still hasn't removed their contingency?
If a buyer doesn't remove their contingency when it's due, the seller can furnish the buyer with NTB (Notice of buyer to preform). A notice of buyer to preform comes with a deadline, usually 2 days, for the buyer to remove their contractual contingency. If the buyer does not remove their contingency, the seller has grounds to cancel the contract. In that case, the buyer retains their earnest money deposit, as they are protected by a contingency they have never removed.
Can escrow close without a buyer ever removing their contingencies?
Short answer is yes. If for any reason the buyer doesn't remove their contingency and the seller furnishes the buyer with a notice to preform but choose to continue waiting until the buyer clears their contingency, escrow could technically close as is. Although, this is an unlikely scenario.
Disclaimer: This article is provided for informational purposes and should not be relied upon as legal advice during a real estate transaction. Please speak to your Real Estate agent or attorney for any advice. If you would like to work with a Skyworks Real Estate agent, please contact us directly.