Will I Be Actively or Passively Removed?
Contingencies and Timeframes  Q: Marsha, I am currently under contract to sell my house. The buyer had certain contingencies for items such as a home inspection and getting her loan. The time for her to remove these contingencies has come and gone. I thought our contract would automatically cancel, but my Realtor tells me we have to nudge her to remove contingencies. A: Great question! As you know, contingencies are conditions of the purchase contract that must be met and fulfilled during a home purchase. The buyers contingencies are typically obtaining a loan, having the property appraised for the purchase price, and a physical inspection of the property. However, there can be any number of contingencies. The buyer, for example, may have a contingency that states they must sell their current house in order to purchase the new one. Sellers may also have contingencies. If the seller wants to do a 1031 exchange on a rental property, hell want a contingency that the buyer will cooperate with his exchange. Or the seller may make the sale contingent on him finding a replacement home. There are default timeframes for each contingency in the Residential Purchase Agreement (RPA). They are usually 17 days for an appraisal and home inspection and 21 days for loan approval. The seller will have seven days in which to provide disclosures. As with everything in real estate, these timeframes are negotiable. In todays market, a buyer may shorten the timeframes to make the offer more attractive. Your agent is correct that the contract does not automatically cancel. Todays RPA has active contingency removals. That means the buyer must actively sign off on each particular contingency. The contingency removal date can come and go, and without the buyers active release, the contract is still alive with that contingency just hanging out there. Several decades ago, the California RPA had passive removal for all contingencies. That meant if the buyer hadnt removed a particular contingency by the contract date, it was deemed automatically accepted. This created irate buyers when negligent agents werent on top of the contracts timeframes. The buyers had issues with the houses physical condition, but oops, their agent wasnt time-compliant and the buyers just passively approved the physical inspection. The RPA was changed to require active removal. (Buyers of bank-owned foreclosures should note that banks still use the passive form of removal when selling their foreclosure inventory.) Todays RPA has a paragraph in it called Notice to buyer or seller to perform. Its called NBP for buyers. After the NBP is delivered, the buyer usually has two days to release the contingency, or the contract may be canceled by the seller. A notice to perform is not adversarial. It is politely keeping everyone on schedule. Agents often give an NBP to the buyers when significant contingency release periods are upcoming. This keeps the transaction moving and reveals any significant objections the buyers may have. Ask your agent to give your buyers an NBP right now. Any delay keeps your house sale in limbo. Marsha Gray, DRE #012102130, NMLS#1982164, has been a real estate broker in Santa Barbara for more than 20 years. She works at Allyn & Associates, real estate services and lending. To read more Q&A articles, visit MarshaGraySBhomes.com. She will research and answer all questions submitted. Contact Marsha at (805) 252-7093 or marshagraysb@gmail.com. Every day, the staff of the Santa Barbara Independent works hard to sort out truth from rumor and keep you informed of whats happening across the entire Santa Barbara community. Now theres a way to directly enable these efforts. Support the Independent by making a direct contribution or with a subscription to Indy+. Add to Favorites