Pasadena CA Real Estate

An interesting question was just posed on Trulia. A home buyer was told by her real estate agent that the realtor representing the home seller was going to cancel escrow since loan and appraisal contingencies were not released. The question was – can the seller cancel the escrow?

Absolutely!

When you make an offer to buy a Pasadena home or any California property, your realtor will discuss with you the three main contingencies of the home purchase. These contingencies are:

1. Loan Approval Contingency:  A home buyer can back out of the escrow and NOT lose their earnest money deposit if that home buyer can not qualify for a home loan within the contingency time period.
2. Appraisal Contingency:  A home buyer can cancel the escrow if the home doesn’t appraise to the full purchase price offered. 
3. Home inspection:  A home buyer has an opportunity to hire a home inspector to check the property condition.  Don’t forget that sewer inspection!  If the inspector finds issues that the home buyer was not aware of before and the buyer is unable to negotiate repairs with the home seller or is unwilling to purchase the house after learning of these issues, the buyer can cancel the escrow.  This home inspection contigency would also include any reports that have been provided to the buyer by the home seller.  If it’s a condominium or a townhome, a review of the financial statements and other relevant information about the complex is done at the same time.

These contingencies are in place to protect the home buyer’s earnest money deposit.  In essence, it’s a free look at the property for the buyer without any penalties.

READ MORE:  The fastest way to lose your earnest money deposit

For a home seller, this contingency period or a “free look” is a period of uncertainty.  The deal is not sealed unless and until the home buyer signs off and releases all contingencies.

A good real estate agent representing the seller will ensure that all contingencies are released within the contractual time frames allowed and agreed to.  Usually, the buyer will have anywhere between 7 to 17 days to complete their inspections, get approved for the loan and get the appraisal completed. 

If home purchase contingencies are not released within the agreed upon time frames, a Notice to Perform is sent to the buyer by the seller and if the buyer still does not sign off and releases the contingencies than a home seller is totally in their right to cancel the escrow and move on with the marketing of their Pasadena home.

READ MORE:  Nine Stupid Things Buyers Do to Mess Up their Home Purchase

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