Step 17 to Buying a Home: Removing Contingencies
Now we’re really getting to where the rubber meets the road.
Many buyers perceive the contingencies as being a safety rope, if they are there you have the possibility of backing out. It is vital to understand that the seller is also aware of this.
The purchase agreement that we use in California calls for ‘active removal’ of contingencies. What this means is that when a deadline is reached, the buyer needs to proactively act to either remove the contingency or make some other request, such as for an extension or other action. If the buyer fails to do so, then the seller has two choices. They can do nothing, at which point the contingency is extended, or they can issue a notice to perform requiring the buyer to remove the contingency or cancel the agreement.
My feeling is that in negotiations, and the whole purchase process is a negotiation, it is best to keep the high ground. If you fail to act and force the seller to give you a notice to perform, you are in many ways backing yourself into a corner. You’re going to have to act anyway and you’re making it much less likely that we will have an amicable discussion about any future requests.
In more than twenty-five years in the business, I have only ever seen one instance of a seller losing an earnest money deposit and that was quite literally extraordinary. Therefore, when it comes time to remove the contingencies, expect me to lay out all the reasons why it is the right and proper thing to do.
Go back to Step 16 to Buying a Home: Set Up Homeowner’s Insurance, go forward to Step 18 to Buying a Home: Give Notice To Your Landlord.