Contingencies Stay Active Until The Buyer Removes Them in Writing
Contingenices Don’t Expire Automatically, They Must Be Removed
Contingencies stay in place until they’re removed by the buyer in a contingency removal form. So the three big buyer contingencies are the inspection period, the loan period, and then the appraisal period. Default verbiage in a CAR purchase agreement or an oorp.org purchase agreement has 17 days for the buyers inspection period, 17 days for the appraisal, and 21 days for the loan contingency. Now, sometimes I’ll get a call from a listing agent and they’ll tell me that they’re 25 days into transaction or some number of days that’s far past all the contingency periods and they’ll tell me that the buyer’s not performing or the buyers Lender is having an issue and they’re not returning calls. One of my first questions is did the buyer remove contingencies or did you as the listing agent send a notice to perform when the buyer was late on removing contingencies? Often I hear the answer’s no. For one reason or another parties forget the listing agent forget to ask or they think that once they’ve passed the contingency period that they aut
omatically expire and they come to find out that until a buyer sends that CR form that constitutes your removal form, those contingencies are in place so a buyer could drag out the contingency period for 30 days or 40 days or as long as they want because they last indefinitely. Until the seller sends a notice to perform demanding that the buyer remove their contingencies or the seller can cancel then – and the buyer of course has to respond by either cancelling or submitting their contingency removal – then those contingencies stay in place. So, it’s important to send a notice to perform if the buyers late on their contingency periods or in some transactions that are higher risk for the buyer defaulting or there’s more tension, listing agents will send a notice to perform prior to the contingency expiring because you can, you can actually send a notice to perform two days before the contingency will expire so notice perform will have a two day period let’s say it’s for a loan contingency on day 19 the listing agent can send the buyer’s agent a notice perform to remove that 21 day loan contingency and it’s a way to proactively ask that the contingencies – you’re expecting a contingency to be removed and if on the 21st day the very date of the contingency is supposed to be removed. If it’s not removed by the buyer then the seller through that notice to perform form has the option to then cancel the transaction and that allows the seller to not be stuck at the buyers whim, to not be trapped in that transaction. It allows them (seller) leverage to cancel or tell the buyer that they were going to cancel unless the buyer performs. So remember, contingencies stay in place until the buyer sends a written contingency removal form.
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