La Jolla · Buyer & seller guides · Process
Contingencies in La Jolla: inspection, appraisal and loan
A contingency is a condition written into a home purchase contract. Common ones cover the inspection, the appraisal and the loan. They can affect whether and when a sale closes (becomes final). The exact words and deadlines are in your contract.
I’m Weston Clark, Founding Member of the Dickinson-Clark Team at Compass. I help buyers and sellers in La Jolla and coastal San Diego read contingencies in plain words. Your lawyer, your lender and escrow (the neutral company that holds money and papers until closing) can confirm what yours mean. You can talk about fees with Weston directly. This form does not give a commission quote.
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What a contingency means
A contingency is a written condition in an offer or purchase contract. The sale moves ahead only if the condition is met or dropped. It is not a promise the sale will close, and this page does not tell you to drop any.
In this guide:
- Inspection contingencies, and how to respond to an inspection
- Appraisal contingencies, and what to do after a low appraisal
- Loan contingencies
- How contingencies are removed in writing
- Where to read more on offers, escrow, and buying and selling
The California Department of Real Estate (DRE), the state office that licenses agents, says agents should explain what a contingency means and how it might change the date the sale is final (the closing date) or move-in timing. Check each step with your lawyer.
Inspection contingencies
An inspection contingency (also called an investigation contingency) gives the buyer time, as the contract allows, to check the home. That can include a home inspection, a pest report and other checks the contract lists.
The DRE says the buyer shows they accept the home’s condition by removing this contingency. Or the buyer can ask for repairs or other steps, as the contract allows.
During escrow, inspection reports often go through escrow with other papers. What can be checked, access to the home, and deadlines are in your contract. Ask your lawyer.
More: offer strategy and escrow.
Responding to an inspection
After the inspection, the buyer may answer in writing, as the contract allows. Common choices:
| Choice | What it means |
|---|---|
| Ask for repairs | A written ask for the seller to fix listed items |
| Ask for a credit or lower price | Money off instead of, or along with, repairs |
| Go ahead as-is (no repairs) | Buy the home in its current state, with no repair list |
| Change other terms | A written ask to change timing, deposits or other terms |
| Cancel | Only while the inspection contingency still allows it, under the contract’s notice rules |
The seller can say yes, make a counteroffer (a new offer with different terms), or say no. Talks can go on in writing until both agree, the contingency is removed in writing, or the deal is cancelled under the contract. Spoken talks do not replace the written file. Keep track of which paper is the latest. Weston cannot promise a repair budget, a credit amount or a result. Ask your inspector about the home’s condition.
Appraisal contingencies
An appraisal is a written opinion of what a home is worth, made by an outside expert. That is how the Consumer Financial Protection Bureau (CFPB), a federal agency, puts it. If you borrow to buy, your lender may need a new one. For a typical first home loan, you have the right to get a copy of any appraisal the lender gets.
An appraisal contingency says what happens, as the contract allows, if the appraisal comes in below the agreed price.
- It sets how the contract treats the appraisal versus the price.
- Limits and notices are in the written offer. Check with your lawyer and lender.
- It does not set how much a lender will lend, and no seller has to lower the price.
If the appraisal comes in low
An appraisal gap is the difference between the agreed price and a lower appraised value. The CFPB says paying more than the appraised value carries risk, and a common next step is asking the seller to lower the price. As the contract allows, buyers and sellers often choose one of these in writing:
| Choice | What it means |
|---|---|
| Renegotiate | A written ask to change the price, credits or other terms |
| Buyer covers the gap | The buyer brings more cash when the lender will not lend on the full price |
| Cancel | Only while a written contingency still allows it, under the notice rules |
| Keep the deal as is | Both sides agree to leave price and terms alone |
The seller can say yes, counter or say no. Questions for your lawyer and lender: Does the contract have an appraisal contingency, a loan contingency, both, or neither? If the appraisal is low, what notice and choices does it give? Does any offer wording cover paying the gap, and how? Weston cannot promise a gap amount, a timeline or a result.
Loan contingencies
The DRE says a typical home purchase contract has a loan contingency (also called a financing contingency) unless both sides agree to leave it out. The contract describes the loan needed to close, and the buyer agrees to work hard to get it. If the buyer cannot get that loan in the time allowed, the contract’s notice, removal and cancel steps apply.
The DRE escrow guide adds that if the deal depends on a loan, the buyer must line up the loan, get approved and meet the lender’s conditions before the money is sent. Those conditions can include an appraisal the lender accepts.
| Item | What it is about |
|---|---|
| Loan contingency | Whether the buyer gets the loan described |
| Appraisal contingency | What happens if the appraisal is below the price |
| Lender’s appraisal condition | Often needed for the loan; not the same as an appraisal contingency in the contract |
Ask your lawyer and lender how these fit together in your deal.
Removing contingencies, in writing
The DRE says any removal of a contingency must be in writing. Many California home sales use a standard Contingency Removal form (the paper that drops a condition). The form version and how notice is given are in your contract. Ask your lawyer.
The DRE escrow guide says contract questions go to a licensed broker or a lawyer. The escrow company follows its written instructions.
Questions for your lawyer:
- Which contingencies are in this contract?
- How is written notice given to remove or extend them?
- What happens if one side misses a deadline?
- How do the inspection, the appraisal and the loan conditions fit together here?
Related guides
| Topic | Start here |
|---|---|
| Contingencies | You are here |
| Offer strategy | /offer-strategy-la-jolla |
| Escrow | /escrow-la-jolla |
| Home inspection | /home-inspection-la-jolla |
| Buying and selling | /buying-and-selling |
| Seller prep checklist | /seller-prep |
| Guides | /guides |
| La Jolla | /la-jolla |
None of these replaces your lawyer, escrow or your lender.
More on sandiego.homes
- Offer strategy: how contingencies show up in offers
- Escrow: papers and steps to closing
- Buying & selling: the bigger picture
- Seller prep: a checklist before you list
- Guides · La Jolla
FAQ
What is a contingency in a purchase contract?
It is a written condition in the offer or contract. The DRE, the state office that licenses agents, says agents should explain what it means and how it could change closing or move-in timing. The exact words are in your contract, so ask your lawyer.
What is an inspection contingency, and how do I respond to an inspection?
It gives the buyer time to check the home, such as a home inspection and pest report. After the inspection, the buyer may ask for repairs, ask for a credit, go ahead as-is (in its current state), change other terms, or cancel while the contingency allows. The seller can say yes, counter or say no.
How is an appraisal contingency different from a loan contingency?
A loan contingency is about whether the buyer gets the loan described. An appraisal contingency is about what happens if the appraisal, an expert's opinion of value, is below the price. A lender may still need an appraisal for the loan either way. Ask your lawyer and lender.
What can happen if the appraisal comes in low?
As the contract allows, the buyer and seller may renegotiate, the buyer may bring more cash to cover the gap, the buyer may cancel while a contingency allows, or both may keep the deal as is. The seller can say yes, counter or say no. Every step should be in writing.
How are contingencies removed?
The DRE says any removal must be in writing. Your contract sets the forms and how notice is given. Ask a licensed broker or lawyer about the contract. Escrow follows its written instructions.
Is this legal advice?
No. This page is general information. Ask your lawyer, your lender and escrow about contingency wording, removal notices, inspections, appraisals and loans. Cash offers can still include inspection, appraisal or other conditions, so read the written offer.
Talk with Weston about contingencies
Tell me if you are writing or reviewing an offer. I can walk you through the inspection, appraisal and loan terms in plain words, and your lawyer can confirm them.
Or call (858) 997-8998 · weston@sandiego.homes · Search on Compass
Weston Clark · Founding Member of the Dickinson-Clark Team at Compass · (858) 997-8998 · weston@sandiego.homes
Weston Clark, DRE #02122466 · Compass, DRE #01527365
Compass is a real estate broker licensed by the State of California and abides by Equal Housing Opportunity laws. All material presented herein is intended for informational purposes only, compiled from sources deemed reliable but not verified. Changes in price, condition, sale or withdrawal may be made without notice. All measurements and square footage are approximate.
⌂ Equal Housing Opportunity. This page is general information about places and process — not legal, tax, title, insurance, lending, or financial advice. Confirm contingency language, removal notices, inspections, appraisals, and financing with counsel, your lender, and escrow. Brokerage compensation is discussed directly with Weston for the specific transaction.