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Contingency Period: the Buyer's Ultimate Safeguard

When buying real estate in Santa Cruz, The buyer has the sublime opportunity to inspect the property thoroughly, after agreeing to buy the property and while in escrow, during what is known as the "inspection" or "contingency" period of the C.A.R. Purchase Contract. The "default" inspection period is 17 days; during this time, the Buyer has free reign to inspect the property. Until the end of the Buyer's inspection period, if he should for any reason find that he doesn't want to buy the property , the Buyer may withdraw from the contract, and receive 100% of the deposit back from escrow, which is then cancelled.

Often times, a Buyer will ask to stipulate a specific contingency, for instance, that the property must be found to be legal, that is, to have the proper permitting for its use. While the Buyer can make this specific stipulation, it is unnecessary. As a Buyer, you can withdraw from the contract for any reason. If it's lacking permits, if the color is wrong, if you don't like the roofline so much after all - for whatever reason, the Buyer may withdraw, and there is scant need to stipulate specific contingencies in the contract.

Suppose that during the inspection period that the Buyer finds that the heating system is on the verge of collapse, and that there is heavier termite damage than had been disclosed by the Seller. Faced with this knowledge, the Buyer may then decide to withdraw from the contract with no loss of deposit, as long as he does so before the end of the contingency period. Alternatively, the Buyer may ask the Seller to lower the agreed contract price. Or, the Buyer may ask the Seller to cover some of the Buyer's closing costs, ostensibly so the Buyer may use the savings to do the necessary repairs himself.

The Buyer, if he can convince the Seller that there are additional problems with the property beyond which were disclosed, stands a good chance of receive some kind of price adjustment or credit from the Seller. If and when this occurs, the Buyer then agrees to release contingencies, and increase his deposit as specified in the contract.

After the Buyer has released contingencies, he may not then withdraw from the contract without the serious risk of losing his "earnest money" deposit. Up until the release date, though, the Buyer's deposit is completely safe; the buyer can back out for any reason and have 100% of the deposit money refunded.

See also: Liquidated Damages and Deposit Forfeitures

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