How to Protect Yourself in the Buying Process: Understand Your Rights

Buying a home is one of the biggest investments you’ll ever make, so it’s important to know your rights and protect yourself throughout the process. Understanding the rights to your contract will help you avoid costly mistakes.

Understand the Contract: Know Your Rights
Once you’re in escrow, you have several legal opportunities to back out of the purchase if something doesn’t meet your expectations or if the home isn’t what you thought it was. 

Did You Know? There are typically seven ways to legally cancel a purchase contract during escrow.

1. Home Inspection Contingency

• What It Is:
  This allows the buyer to hire a professional home inspector to check the property for issues like structural damage, plumbing problems, or electrical concerns.
• How to Protect Yourself:
  If the inspection reveals major problems, you can negotiate repairs, ask for a credit, or cancel the contract.
• Typical Timeline:
  Inspections are usually completed within 7-15 days after escrow begins.

2. Seller Real Property Disclosure Statement (SRPDS)

• What It Is:
  A document where the seller lists any known problems with the property, like past damage, repairs, or other issues.
• How to Protect Yourself:
  If the SRPDS reveals something significant, such as unpermitted work or recurring problems, you can cancel the deal.
• Typical Timeline:
  The SRPDS is typically provided within 7 days of escrow opening. Buyers usually have 5-10 days to review and respond.

3. Condo/Association Documents

• What It Is:
  For condos or homes with homeowners’ associations (HOAs), these documents outline rules, fees, and financial information about the HOA.
• How to Protect Yourself:
  If you discover something you don’t agree with, like high fees or restrictive rules, you can cancel the contract.
• Typical Timeline:
  These documents are usually delivered within 10 days of escrow opening, and you typically have 5-10 days to review and respond.

4. Termite Inspection Contingency

• What It Is:
  A termite inspector checks for signs of active infestations or damage caused by termites.
• How to Protect Yourself:
  If a termite inspector finds signs of termites and recommends treatment, the seller is usually obligated to pay for that treatment. Ie: Tenting, Spot Treatment, Heat Treatment, etc
• Typical Timeline:
  Termite inspections are usually done within 15 days before closing.

5. Survey Contingency (If Applicable)

• What It Is:
  A property survey confirms the boundaries and checks if you have a wall or fence on your neighbor's property or vice versa.
• How to Protect Yourself:
  If your neighbor's wall or fence is on your property by more than 6 inches you can cancel the contract. 
• Typical Timeline:
  Surveys are ordered early in escrow and are typically completed within 2-3 weeks.

6. Title Report Contingency

• What It Is:
  A title report ensures the property has no liens, legal disputes, or ownership issues.
• How to Protect Yourself:
  If the title report reveals problems, you can cancel the deal or require the seller to resolve the issue before closing.
• Typical Timeline:
  The title report is usually delivered within 7-10 days of escrow opening.

7. Financing Contingency

• What It Is:
  A financing contingency allows you to cancel the deal if you can’t secure a loan for the purchase.
• How to Protect Yourself:
  If you can’t get the loan you are not forced to purchase the home. You can walk away without losing your deposits.
• Typical Timeline:
  Conditional Loan Approval is due 10 days before closing. Final Loan Approval due 5 days before the closing date. 

What Happens If You Back Out Illegally or Default?
If you cancel the contract without a valid reason or fail to meet your obligations:

• Loss of Earnest Money: You may forfeit your deposit(s), typically 1-3% of the purchase price.
• Legal Consequences: The seller may sue for damages, especially if they lose money while relisting the home.
• Damaged Reputation: Defaulting could make future negotiations harder, as sellers and agents may see you as unreliable.