Which contingencies to keep, waive, or modify — and how to think about the risk trade-offs in a competitive Peninsula market.
Your optimal contingency approach depends on your financing, risk tolerance, and the property. Answer four questions to get a starting recommendation — then discuss with your agent before writing.
This tool gives directional guidance, not legal advice. Every transaction is different; use this as a starting framework for your conversation with your agent.
This is a directional framework, not legal or financial advice. California law (CAR RPA) governs the specific language of contingencies. Consult your real estate agent and attorney before removing any contingency. Earnest money is typically at risk once contingencies are removed.
What each one protects, what waiving it costs, and where the real risk lives.
California's default inspection contingency (17 days, CAR RPA default) gives you the right to review inspection reports and cancel for any reason during that window. In practice, most Peninsula buyers waive this only after reviewing pre-listing reports. Waiving without reports is high-risk on any home — especially pre-1980 properties with deferred maintenance, foundation history, or drainage concerns.
Risk if waived and problems emerge: You close on a property with undisclosed defects and have no contractual recourse unless the seller committed fraud.
The loan contingency (21 days, CAR default) protects your deposit if your lender cannot fund the loan. Many Peninsula buyers waive this to compete — but it requires that you could realistically close without the loan, or have ironclad pre-approval. Self-employed buyers, RSU-income buyers, and anyone with a complex asset picture face elevated risk here.
Risk if waived and financing fails: You forfeit your earnest money deposit (typically 3% of purchase price on the Peninsula — $60,000+ on a $2M home).
If the property appraises below your purchase price, this contingency lets you cancel or renegotiate. Most Peninsula homes in competitive markets close above appraised value — meaning buyers who keep this contingency frequently face a gap they must cover in cash anyway. Waiving is common on the Peninsula but requires liquid reserves to cover the difference.
Risk if waived and home appraises low: You must bring the appraisal gap in additional cash, or lose your deposit if you cannot close.
This contingency lets you cancel after reviewing the seller's Transfer Disclosure Statement, Natural Hazard Disclosure, and (for condos/HOAs) the CC&Rs, budget, reserve study, and meeting minutes. Most experienced Peninsula buyers keep this — it costs you nothing to expedite it (5–7 days), and it protects against genuinely material surprises like undisclosed litigation or a depleted HOA reserve fund.
Risk if waived: You lose the right to cancel based on what disclosures reveal; material issues discovered post-close require litigation to remedy.
A contingency is a condition that must be satisfied before the purchase contract becomes binding. California's standard purchase agreement (the CAR RPA) includes four major contingencies by default: the inspection contingency (right to inspect and cancel based on findings), the loan contingency (purchase depends on obtaining financing at agreed terms), the appraisal contingency (purchase requires an appraisal at or above purchase price), and the seller disclosures/HOA review contingency (right to cancel based on what disclosures reveal). Each contingency has a default number of days; the parties negotiate different timelines. Contingency removal is documented in writing on the Contingency Removal form (CR).
Waiving the inspection contingency removes your right to cancel based on property condition. In most competitive Peninsula offers, however, the buyer has the seller's pre-listing inspection reports plus specialist reports (roof, foundation, pest) in hand before writing the offer. Waiving inspection is more defensible when: (1) you have reviewed thorough pre-listing reports from licensed inspectors; (2) the home's age and condition are well-documented; (3) you or an advisor have physically walked the property before writing. It is least appropriate for homes built before 1978 (lead and asbestos risk), homes with visible foundation movement or drainage issues, or any property without pre-listing reports. Even with a waived inspection contingency, you still receive all seller disclosures (TDS, NHD, SPQ) during the disclosure review window.
Yes, and many Peninsula buyers do. Waiving the loan contingency while using a mortgage exposes you to potential loss of your earnest money deposit — typically 3% of purchase price, or $60,000 on a $2M home — if financing fails. It is more viable when: (1) you have a strong pre-approval from a reputable lender who has reviewed all financials; (2) you have substantial liquid assets and could close without the loan if financing collapsed (this is the realistic backstop for most buyers who waive this contingency); (3) the property is a conventional conforming or jumbo purchase without unusual characteristics that complicate underwriting. Buyers with RSU-dependent income, self-employed buyers, or those using non-traditional assets to qualify face higher risk here than salaried W-2 borrowers. Before waiving, speak with your lender specifically about that property and get their honest read on underwriting confidence.
The appraisal contingency gives you the right to cancel (and recover your deposit) if the property appraises below your purchase price. When you bid over asking — which is common on the Peninsula — the lender will only fund against the appraised value. If you bid $2.5M and the home appraises at $2.3M, you must bring an additional $200K in cash to close the gap, or renegotiate (which the seller is not obligated to agree to). Waiving the appraisal contingency signals to the seller you will cover any gap. This makes your offer more attractive but requires real cash reserves. A common Peninsula approach: waive the appraisal contingency but keep the loan contingency — accepting the appraisal gap risk while retaining the ability to cancel if financing fails for other reasons (job loss, property condition discovered by underwriter, etc.).
In most cases, yes — and in competitive offers, you can satisfy it quickly without waiving it. The HOA/disclosure contingency gives you the right to cancel if you find something materially adverse in the seller's Transfer Disclosure Statement, Seller Property Questionnaire, Natural Hazard Disclosure, or (for HOA properties) the CC&Rs, budget, reserve study, meeting minutes, and pending litigation disclosures. The risk profile here differs from inspection or loan: adverse HOA financials, undisclosed litigation, or a material misrepresentation in the TDS are harder to price and negotiate around than a deferred maintenance item. Most experienced Peninsula buyers keep this contingency and use the first 5–7 days of contract to thoroughly review all disclosure packages. An expedited review is competitive; a waived review creates risk that is difficult to quantify.
When a buyer removes all contingencies in writing, the earnest money deposit becomes non-refundable in almost all circumstances short of seller default or fraud. The seller can treat the deposit as liquidated damages if the buyer subsequently fails to close. This is meaningful on the Peninsula where deposits are typically 3% of purchase price — $60,000 on a $2M home, $90,000 on a $3M home. Sellers understand this and often prefer offers with contingencies already removed or with very short contingency windows (5–10 days vs. the CAR RPA's 17-day default for inspection). Buyers who remove contingencies should be financially and emotionally committed to the purchase; this is not a tool for locking up optionality.
Lisa will walk you through which contingencies make sense for your specific situation before you submit — so you compete without unnecessary exposure.
Talk to Lisa