Whether you’re buying or selling a home in San Diego, understanding contingencies is essential to navigating the escrow process with confidence. Contingencies are conditions written into the purchase contract that must be met for the transaction to proceed. They’re designed to protect both the buyer and the seller and ensure that everyone is fully informed before making a final commitment.
Common Contingencies You Should Know
1. Inspection Contingency
Buyers have the right to conduct physical inspections of the property—typically within 17 days of the offer being accepted. This allows them to assess the home’s condition and request repairs, credits, or even cancel the contract if serious issues are uncovered.
2. Appraisal Contingency
If the buyer is obtaining a loan, the lender will require an appraisal to determine the home’s market value. If the appraisal comes in lower than the purchase price, the buyer can renegotiate the terms, bring in the difference in cash, or cancel the contract.
3. Loan Contingency
This protects buyers in case their mortgage financing falls through. If the buyer is unable to secure financing by the deadline (usually around 21 days), they may cancel the agreement without losing their earnest money deposit.
4. Insurance Contingency
Especially important in California, this contingency allows the buyer time to secure acceptable homeowners and fire insurance coverage. With increasing challenges in high-fire-risk areas, buyers may cancel the contract if they are unable to obtain adequate insurance at a reasonable cost.
What Buyers and Sellers Should Expect
In San Diego’s fast-moving real estate market, understanding timelines and managing contingencies is key. For buyers, it’s important to move swiftly with inspections, financing, and securing insurance. For sellers, knowing what to expect and preparing your home—especially for inspections—can help the transaction progress smoothly.
Once all contingencies are removed, the buyer’s deposit becomes non-refundable, and the contract becomes binding for both parties. That’s why it’s crucial to work with experienced agents who can help you navigate each step, meet deadlines, and negotiate terms that align with your goals.