Contingencies Decoded: Your Safety Net When Buying a California Home

Buying a home in California? Then you need to understand contingencies—the often-overlooked clauses that can protect your earnest money deposit and give you the freedom to walk away from a deal under specific conditions.

In today’s competitive market, especially in the Bay Area, knowing how contingencies work could save you thousands and a whole lot of stress.

Contingencies are conditions written into your home purchase contract. They function as safety nets, allowing you (the buyer) to cancel the deal under certain circumstances without losing your earnest money deposit.

1. Loan (Financing) Contingency

This contingency gives you time to secure mortgage approval—typically within 17 calendar days by default (though often shortened in competitive areas like Silicon Valley).

If you're not approved within this time frame, you can cancel the contract and keep your deposit. But once you remove this contingency in writing, you’re committed to buying—even if financing falls through.

2. Appraisal Contingency

Your lender will conduct an appraisal to verify that the home’s market value supports the purchase price. If the home appraises lower than expected, you may:

• Renegotiate with the seller

• Pay the difference yourself

• Challenge the appraisal

• Walk away—if this contingency is in place

Without it, you risk losing your deposit if you can’t make up the shortfall.

3. Property (Inspection) Contingency

This allows you to hire a licensed inspector to evaluate the home’s condition. If the report reveals major issues (like plumbing, roofing, or structural defects) and the seller won’t fix them, you can cancel the deal without penalty.

Note: Even with “as-is” contracts, this contingency is still essential. Many buyers misunderstand its power—even some agents.

These clauses don’t give you an out for “cold feet.” You can’t back out just because you change your mind. Each contingency only applies to specific, contractually defined conditions—such as loan denial, low appraisal, or a bad inspection.

Most California real estate contracts use calendar days to track contingency deadlines, but some elements (like initial deposits) may be based on business days. Always read the fine print and confirm deadlines—especially when different counties or agents use different forms.

Once you remove all contingencies in writing, you’re fully committed. If you cancel the deal for any reason not covered under the contract, your earnest money deposit could be forfeited to the seller.

Final Thoughts: Protect Yourself with the Right Contingencies

Contingencies are not optional protections—they’re essential tools that give buyers breathing room to investigate, evaluate, and make confident decisions.

At The Walker Team of Intero, we walk you through each step of the contingency process to ensure you know your rights, deadlines, and how to use them to your advantage.