What Is The Contingency Period? An FAQ for Home Buyers

All About the Contingency PeriodOne of the parts of the home buying process is the contingency period. Knowing what the contingency period is and what your role is during the contingency period can help you purchase the home you want.

The contingency period is a period of time that occurs an offer has been accepted and before the close of escrow. The period begins on the day that the offer is accepted, and ends on whatever day is listed in the contract paperwork. During the contingency period, the home buyer is allowed to inspect the home for problems and decide whether or not to proceed with the sale of your dream Port Reyes Station home.

What Can Be Done During the Contingency Period?

The type of inspections that a home buyer chooses to perform during the contingency period depends on the home buyer. Most home buyers choose to get a standard home inspection performed by a certified home inspector. During the standard home inspection, the inspector will look at various systems in the home such as:

  • Plumbing
  • Roofing
  • Electrical
  • Appliances
  • Flooring

In addition to the standard home inspections, many home buyers will also choose to get specialized inspections. For example, home buyers may also decide to have the home inspected for termites. This is not included as a standard part of a general home inspection.

What happens if the buyer finds problems with the home during the inspection?

If problems are discovered during the inspection process, the home buyer can either submit escrow cancellation instructions, choose to purchase the home anyway or ask the seller to make improvements as a requirement of lifting the contingencies. Buyers finding it difficult to decide how to proceed can consult with their real estate agent.

What does it mean to purchase a property “as is”?

If it is written into the contract that the buyer will purchase the property as is, then the buyer's only choices at the end of the contingency period are to either purchase the house as is, or cancel escrow. Under these circumstances, the seller will not make changes to the home.

If you cancel escrow at the end of the contingency period because the home inspection uncovers significant problems, you will not lose your earnest money deposit. The only way that a buyer would lose his or her earnest money deposit because they changed their mind as a result of an inspection is if the contingency period was waived.

Why would a buyer waive the contingency period?

Sometimes buyers waive the contingency period to make their offer more appealing to sellers. This is a common strategy that sellers use when they're trying to buy in a competitive market. Waiving the contingency period adds a level of security that sellers find appealing, because the offer on the home is far less likely to fall through as the result of problems with the house.

Home buyers who are considering waiving the contingency period should think carefully before proceeding with an offer. Many older homes have hidden problems that may not be apparent after a quick walk through. The contingency period protects buyers from purchasing a home with problems.

How long is the contingency period?

The contingency period may vary, so check with your real estate agent to find out what your contingency period is. It's possible to negotiate a longer contingency period, but this is less desirable to sellers and may make an offer on a home less attractive.

Your real estate professional can answer your questions about the contingency period. To find out more about the home buying process in general, contact him or her today.

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