When you buy or sell a home, the purchase contract usually includes contingencies. These are built-in protections that give the buyer time to make sure everything checks out before fully committing to the purchase. Contingencies are important because they allow the buyer to cancel or renegotiate if certain conditions aren’t met. Once contingencies are removed, the buyer’s deposit is at risk if they decide not to move forward, and the transaction becomes much more secure. Below are the most common contingencies you’ll see in a California real estate contract:

Inspection Contingency
The buyer has the right to have the property inspected by licensed professionals. This covers the condition of the home, safety issues, and potential repairs.

• Why it matters: Protects the buyer from unexpected problems.
• When it’s removed: Once the buyer is satisfied with the inspections, negotiates repairs, or decides to move forward as-is.

Appraisal Contingency
If the buyer is getting a loan, the lender will require an appraisal to confirm the property’s value.

• Why it matters: Ensures the buyer isn’t overpaying and the lender isn’t loaning more than the home is worth.
• When it’s removed: After the appraisal confirms the value, or if the buyer agrees to cover any difference.

Loan (Financing) Contingency
Most buyers depend on mortgage financing. This contingency allows time for the lender to review the buyer’s credit, income, and the property before final loan approval.

• Why it matters: Protects the buyer if they can’t get the loan.
• When it’s removed: Once the buyer has received conditional loan approval and is satisfied with the terms.

Sale of Current Home Contingency
Sometimes a buyer needs to sell their existing home before purchasing a new one. This contingency ties the purchase to the successful closing of their sale.

• Why it matters: Gives buyers flexibility, but creates more uncertainty for sellers.
• When it’s removed: Once the buyer’s home is sold, or the contingency period expires.

Other Possible Contingencies
Depending on the property, there may be other contingencies such as:

• Title review – ensuring the property has clear ownership.
• HOA review – reviewing rules, fees, and financials for condos or planned communities.
• Disclosures review – giving the buyer time to review seller-provided documents.

Contingency Removal
When contingencies are removed, the buyer is moving forward in full commitment to the purchase. For buyers, it means they’ve completed their due diligence and are ready to proceed. For sellers, it provides confidence that the sale is on track and the risk of cancellation is greatly reduced.