Contingencies are mainly put in place for the buyer to back out of a sale if something goes wrong, usually without losing their deposit. The seller might entertain other offers, but won’t deal with another buyer until the contingent offer is concluded one way or another.

Seller contingencies:

  • The seller has 7 days to deliver all the disclosures relevant to the property many of which are standard California Association of Realtors forms.  The most important of these will be the Transfer Disclosure Statement  and Seller Property Questionnaire (not provided with foreclosures, nor generally with probates and trust sales) which will point out all the facts known by the seller; the Natural Hazards Report, showing anything and everything to do with the property and surrounding area; the Preliminary Title Report, which will show any defects on title if any.
  • If the property is a condominium or there is a homeowners association, then the seller is required to request the covenants, conditions and restrictions (CC&Rs) of the community from the Board or management company.  The buyer reviews these and, should there be something of concern, then the they can opt to request cancellation of the contract.
  • The seller is required to comply with several items on the contract:  if requested, they must have a termite inspection on the property and if there is infestation and they are require to, then they need to have the pest control company remediate it.
  • If requested, the seller must provide a one-year home warranty for the buyer.  Usually the buyer’s agent will order this.
  • There are certain requirements mandated by the city in which the property is located.  Some of these may include retrofitting requirements such as low-flow toilets, water heating bracing, gas shut-off valves, smoke detectors, and most recently, carbon monoxide detectors (the latter are not required to close escrow, but may be asked for by the lender).

If one side fails to comply with their part of the contract then the other side can issue a Notice to Perform. Failure to do so can result in a request to cancel the contract.  In order to cancel a contract, both sides need to sign.