Standard California Association of Realtor purchase contracts give a buyer, by default, 17 days to remove contingencies. Before the contingencies are removed, in writing, the buyer can cancel the contract and have his earnest money deposit returned. After a buyer has removed all the contingencies, the buyer is obligated to move forward with the purchase. If the buyer then decides to cancel the contract, the seller has the right to demand the buyer's earnest money deposit and may be entitled to liquidated damages. When buyers refuse to sign a release of contingencies, the seller has the right to cancel.
Home Purchase Contingencies
• Appraisal. Buyers who obtain a loan will be required by the lender to pay for an appraisal to substantiate the purchase price. Sometimes, a low appraisal is received.
• Loan Contingency. Even though a buyer may hold a loan preapproval letter, further investigations concerning the property or the borrower could result in a loan denial.
• Home Inspection. Buyers have the right to hire a home inspector and conduct a complete inspection of the home. Sometimes home inspectors will call for additional inspections by licensed entities to check the electrical system, the heating and air systems, the roof, or for mold.
• Lead-based Paint. Federal laws gives all buyers 10 days to inspect for lead-based paint. Many homes built before 1978 contain lead-based paint.
• Wood Destroying Pest Inspection. The contract should specify who will pay for the pest inspection and whether outbuildings or garages are covered in the inspection.
• Preliminary Title Report. Title investigations will disclose easements, CC&Rs, and monetary liens of record, including the ability of the seller to transfer clean title to the buyer. Sometimes title searches reveal problems such as contractors' liens, issues related to prior homeowners, and unpaid tax liens. Until such problems are cleared up the seller cannot legally transfer title of the property to another person. If you can, always order a title policy.
• Homeowner Association Documents. Buyers should obtain for approval a copy of all homeowner association documents, including meeting minutes, if applicable.
• Seller Statutory Disclosures. Sellers are required in CA to disclose all known material facts that might affect the value of the property, including preparing and delivering a Transfer Disclosure Statement (TDS), Natural Hazard Disclosure Statement, special taxes and statutory supplemental and / or questionnaire.
• Contingent on Selling Existing Home Buyers who have an existing home might want to buy before selling and make the contract contingent on selling their home. Sellers who accept contingent offers like this often give the buyer a certain number of days to perform. If the buyer cannot perform, the seller retains the option to cancel the contract.