In a previous post, we discussed Bay Area real estate contingencies. As a quick summary – a contingency is a condition that must be fulfilled before the sale of a home can close. In California, these conditions are typically found in the buyer’s offer. San Francisco Bay Area real estate contingencies typically fall under three major categories: appraisal, home inspection and mortgage approval.
One question we often get asked by our clients is, what happens if I don’t remove my buyer contingencies?
Torii is here to shed some light on this question!
Lifting The Buyer’s Contingencies
When a buyer and seller’s agreed-upon contingency removal date has arrived, it is incumbent upon a buyer and his or her agent to honor this obligation. However, sometimes circumstances necessitate keeping one or several of buyer’s contingencies in place.
In that case, it is best practice for your agent to notify the other party and formally request a contingency extension (your Torii agent can help with this!).
On the seller’s side, a listing agent should request that the buyer lift their contingency. This is usually done with a “Notice of Buyer to Perform” (NBP) requesting that buyer either remove the contingency or back out of the contract.
If that does not happen, technically a buyer may still be in contract under Section 14 of the California Association of Realtor’s Residential Purchase Agreement:
If seller does not obtain a contingency removal, buyer’s inspection period remains in effect, “based on a remaining contingency.” See 14(B)(4).
If, by the time specified in this Agreement, Buyer does not Deliver to Seller a
removal of the applicable contingency or cancellation of this Agreement, then Seller, after first Delivering to Buyer a Notice to Buyer to Perform (C.A.R. Form NBP), may cancel this Agreement. See 14(B)(4).
This means that technically buyer’s contingency can remain in effect all the way through the deal — meaning buyer can back out and recover any earnest money deposited with escrow – and seller must first deliver a Notice to Perform before cancelling the contract.
These are very buyer friendly contract provisions. Again, it’s important to stay true to your contract obligations, but armed with this knowledge hopefully you and your agent are ready to tackle any contingency circumstances that present themselves. Torii is here to help!