How to fill out contingency removal form

Typical purchase agreements contain the following contingencies for the buyer:

• Seller Disclosure Statements. The contract is contingent upon they buyer’s approval of the property disclosure statements as prepared and signed by the seller.  There is an automatic 3 day right of rescission when the documents are received.
• Inspection contingency. We have the opportunity to hire qualified inspection companies to determine the condition of the property.  This includes, but is not limited to, termite inspections, general home inspections, chimney inspections, pool/spa inspections, roof inspections, and others as needed.  Once we have had the property inspected and have reviewed the inspection reports, we may develop a Buyer Request for Repairs.  Note that depending on whether the offer was written for an “As Is” purchase – repairs are usually negotiable, and once we reach agreement on any requested repairs, the inspection contingency is removed.
• Geologic & Environmental and California Tax Reports. These reports, prepared by an independent Geologist, show whether the property is located in Earthquake zones, fire zones, flood zones, industrial use zones, and other zones as defined by the State.  It will also show you the current property tax assessment rate for this property, along with any additional assessments that are paid as part of the property taxes.  All of these documents should be reviewed carefully. These documents are generally due to be removed as a contingency when your inspection contingency removal is due.
• Appraisal contingency. The contract may be contingent upon the property appraising at the sales price.  If the appraisal falls short of the sales price, you are not obligated to proceed with the purchase.  It is vital that the lender order the appraisal as soon as possible after we have a fully-ratified purchase contract in order to meet the contingency removal date.
• Loan contingency. The contract is likely contingent upon the buyer’s ability to obtain a loan under the terms indicated in the purchase agreement.  You are required to complete a loan application with the lender ASAP, and provide whatever information the lender needs to complete your loan request.  Once the loan is approved, you need to confirm with the lender that you can with confidence remove your loan contingency, and that there are no outstanding conditions of the approval that could prevent you from closing escrow.
• Preliminary Title Report. The contract is also contingent upon your review and approval of the Preliminary Title report as provided by the Title Company.  This report shows all matters of public record that are recorded against the property, including easements, common maintenance agreements, liens, etc.  If there are CC & R’s on the property [recorded Conditions, Covenants, and Restrictions] you have the right to review them to see if there are any restrictions that you object to.
• HOA Documents [if applicable]. Lastly, if the property has a Homeowner’s Association, then the purchase is contingent upon your review and acceptance of the Homeowner’s Association documents.  These documents will typically include the Budget, By Laws, Articles of Incorporation, Financials, and Minutes from past meetings.  The minutes are usually the most important of these items, as they are a record of issues that have been raised at the Homeowner Association meetings.

Once all contingencies are removed, you are in effect saying you understand and accept the property in its current condition [subject to any agreed repairs by the seller] and are going to close escrow.  At that point, your deposit is theoretically at risk, so any failure to close escrow on your part might lead to losing all or part of your deposit.

What is a contingency? | What is a loan contingency | Most common contingencies | Appraisal contingency removal | Notice to perform | Contingency removal dates | Removal by state | Waived contingencies | Contingencies for sellers | FAQs

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In real estate, contingencies are a way of allowing the buyer or seller to back out of the deal if certain conditions aren't met.

Contingencies can be removed when all conditions are met or by passing the contingency deadline. In California, a contingency removal form is necessary. When all contingencies have been removed, the real estate contract becomes binding.

Sellers prefer purchase contracts with shorter contingency periods and fewer contingencies overall because simpler contracts make for faster closings. However, longer contingency periods and additional contingencies protect buyers from committing to a home they may not want or be able to afford.

Navigating the legal complexities of real estate contingencies is difficult. If going it alone seems overwhelming and risky, you'll want to have a good agent on your side. Our friends at Clever Real Estate will match you with top local agents who can help sell your home for just 1%, and buyers in 41 states can receive up to 0.5% cash back after closing!

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What Is a Contingency in Real Estate?

A real estate contingency is a clause that specifies a condition that must be met within a specific time period. Otherwise, the buyer can cancel the deal without losing their earnest money deposit. For example, a loan contingency allows the buyer a certain number of days to find financing or the buyer can walk away without penalty.

A home that is listed as “active with contingency” means the seller has accepted an offer but one or more contingencies are still active, meaning the contingency deadlines — aka the contingency removal dates — have not yet passed.

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What Is a Loan Contingency?

The loan contingency — also known as a mortgage contingency or financing contingency — states that the home purchase can't happen if the buyer can't find financing. Loan contingencies are extremely important for all non-cash buyers.

If you can't find financing, and you remove the loan contingency, you will most likely lose your earnest money when you need to back out of the deal. If you do not remove the loan contingency, you will be able to back out of the deal without penalty.

The loan contingency clause can be very specific. For example, it might say the buyer has 21 days to find a 30-year loan for $400,000 at an interest rate not to exceed 4.25%. If the buyer can't find financing within those specifications, the buyer would be within their right to walk away from the purchase and keep their deposit.

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The Most Common Real Estate Contingencies

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If you're using a home purchase loan, you'll need both a loan contingency and an appraisal contingency since your lender will only lend you as much as it thinks the home is worth.

Most contingencies exist to protect home buyers. But in a hot market, you need to be careful when considering what ones you need, since multiple contingencies can weaken an offer. Inspection contingency removal is rarely recommended, but shortening the inspection period window might be a good idea.

Appraisal Contingency Removal

Another important contingency is the appraisal contingency, which allows buyers to back out if the home does not appraise for the sales price.

The appraisal contingency protects the buyer and the lender from a home that isn't worth the price. Lenders will only fund the appraised value of the house, and waiving the appraisal contingency means you're on the hook for making up the difference.

Some lenders may deny the loan completely if the home doesn't appraise for the sale price. If you don't have an appraisal contingency, you'd also be on the hook for funding the full loan amount or forfeiting your earnest money for backing out of the deal.

If you're looking for more advice about removing the appraisal contingency, read our full guide 👇.

» MORE: Everything You Need to Know About Removing the Appraisal Contingency

Notice to Perform

A notice to perform is a final, official effort to make a party move before a deadline passes. In some states, like California, a notice to perform is required before a real estate purchase contract can be canceled.

Usually, a seller issues a notice to perform to the buyer. Typical reasons include past-due contingencies, failing to deposit earnest money, or the use of a kick-out clause.

Buyers can also use a notice to perform, like if the seller is taking too long to send disclosure paperwork or make agreed-upon repairs.

The notice to perform is an aggressive maneuver and signals that you're ready to cancel the sale if necessary — use it as a last resort.

What is a Contingency Removal Date?

The contingency removal date is the date defined in the purchase offer specifying when the buyer will remove contingencies and commit to closing. If the buyer backs out of a deal after contingencies are removed, they can lose their deposit. In extreme cases, the seller might sue for additional damages.

If something is taking longer than expected, the buyer can request to extend the contingency period. So if a loan contingency removal date is on June 15th but the buyer expects underwriting to finish on the 20th, the buyer can request additional time. The seller may ask for additional earnest money in return.

Contingency periods vary depending on the contingency and location. Home inspection contingencies typically have a 7–14 day window while loan contingencies have a 20-60 day window.

Making an aggressive offer can include shortening these contingency windows, which indicates you can close faster than other buyers. A good real estate agent will be able to help you make a competitive offer that won't get beaten by the competition.

Our friends at Clever hand pick top-performing, local agents who can tell you what you should and shouldn't include in a home offer. Buyers in 41 states can get 0.5% cash back at closing on a $150,000 home purchase, just for using a Clever partner agent!

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Contingency Removal by State

In some states, like California, a document is required for contingency removal. In other states, like in Florida and Texas, passing the deadline can remove the contingency.

Remember that removing contingencies usually means losing earnest money if the deal falls through. If a loan contingency is removed and neither the seller or buyer cancel the sale, the buyer would still be required to finance the home themselves or lose their earnest deposit.

California Contingency Removal Form

In California, sellers and buyers must use a contingency removal form that specifies what contingencies are being removed from the contract.

Removing contingencies in California is only possible with California's contingency removal form. Essentially, the contingency removal date on the contract can be thought of as the deadline to submit the contingency removal form. Only when contingencies are removed can the sale move forward.

Waived Contingency vs. Contingency Removal

A waived contingency is a contingency that the buyer opts not to include in the offer. Buyers waive contingencies to make their initial offer stronger. A buyer who waives the inspection contingency is essentially saying they're committed to the sale regardless of the home's condition — they aren't looking for an escape hatch.

Buyers can still back out of a sale even after they have waived contingencies, but they'll lose their earnest money. In extreme cases, they may be sued for additional damages by the seller.

Kick-Out Clauses and Other Contingencies for Sellers

Most contingencies protect buyers, but some protect sellers.

A kick-out clause is a contingency that allows the seller to "kick out" a buyer if a better offer comes through. Typically, the kick-out clause is used when the buyer includes a home sale contingency, which says the buyer must first sell their current home.

While the home buyer is looking for someone to purchase their current home, the kick-out clause allows the seller to field other offers. If the seller decides to enact the kick-out clause, the seller has to provide the buyer with a notice to perform, and the buyer will have 48–72 hours to remove the home sale contingency before the seller can cancel their contract and accept a different offer.

Other seller contingencies include:

• Home of choice contingency: The seller won't sell their home until they can find another suitable home to purchase.

• Rent-back contingency: The buyer buys the home and the seller becomes a tenant until they can find a place to live. Most home loans have a 60-day limit for rent-back contingencies.

While buyers don't love seller contingencies, they're fair game in a seller's market. The trick is negotiating an offer where your home can sell for maximum value while still including some of these not-so-buyer-friendly contingencies.

A good agent can help you craft a great counter-offer — but we don't recommend overpaying the 2.5–3% rate of a traditional agent. The current median home sale price is $440,300 — at 3%, that's $13,210 in commission fees.

We recommend our friends at Clever. They will pair you with a top-performing local agent who can help sell your home for just 1%. That's just $4,430 on a $440,300 home sale, which means you'll save $8,780. You'll get all the services of a traditional agent at a fraction of the price.

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FAQs About Contingencies in Real Estate

What is a contingency?

A contingency is a clause in a real estate contract that requires something to occur by a set date before the sale can proceed. If a contingency isn't met before that date, the buyer can ditch the sale without losing earnest money. Learn more about contingencies in real estate contracts and what it means to remove contingencies.

How long does a house stay in contingent status?

A home is contingent when an offer has been accepted but there are still contractual contingencies in place. The longest contingency period is typically the loan contingency, which can last from 20-60 days. Learn more about loan contingencies.

How often do contingent offers fall through?

Contingent offers have a greater likelihood of falling through than non-contingent offers because they rely on additional measures, like the buyer finding financing. Sellers usually prefer offers with few or no contingencies. Learn more about contingency removal.

Can a home seller sue a buyer for backing out?

A buyer can back out of a contingent offer without penalty if those contingencies aren't met. But if the buyer backs out of a deal and does not have the right contingencies in place, they’ll forfeit the earnest money deposit to the seller. The seller may also be able to sue them for additional damages in some instances. Learn more about common real estate contingencies.

Can a buyer back out of an accepted offer on a house?

Buyers can back out of an offer without losing their earnest money if they have the right contingencies in place. If a buyer makes a non-contingent offer, or backs out of a deal even though contingencies were met, they will lose their earnest money. They may also find themselves in legal trouble with the seller. Learn more about real estate contingencies.

What is a loan contingency?

A loan contingency [also known as a mortgage contingency or financing contingency] protects the buyer from having to purchase a house if they can't find financing. If the buyer removes the loan contingency but they can't find financing and want to back out of the deal, they will lose their earnest money. Learn more about loan contingency removal.

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